Conference Proceedings

Transcription

Conference Proceedings
(All papers double blind peer reviewed)
17 - 18 February 2016
University of South Australia, Adelaide, Australia
Editors:
Johan Bruwer, Larry Lockshin, Armando Corsi, Justin Cohen and Martin Hirche
Ehrenberg-Bass Institute for Marketing Science, School of Marketing,
University of South Australia Business School, Australia
ISBN: 978-0-9944460-0-8
Copyright © 2016
Ehrenberg-Bass Institute for Marketing Science
9th Academy of Wine Business Research Conference
Wine Business Research that Matters
Session Chairs
Business Strategy and Research Methods
Maureen Benson-Rea
University of Auckland, New Zealand
Armand Gilinsky
Sonoma State University, USA
Hervé Remaud
KEDGE Business School, France
Consumer Behaviour
Sharon Forbes
Janeen Olsen
Tim Dodd
Lincoln University, New Zealand
Texas Tech University, USA
Communication and (Social) Media
Nathalie Spielmann
Gergely Szolnoki
NEOMA Business School, France
Geisenheim University, Germany
Distribution Channels and Retailing
Ulrich Orth
Christian-Albrechts-University Kiel, Germany
Origin/Terroir and Wine Law/Regulation
Vicki Waye
University of South Australia, Australia
Packaging/Labelling
Simone Loose
Sustainability
Steve Goodman
The University of Adelaide, Australia
Wine Branding
Polymeros Chrysochou
Aarhus University, Denmark
Wine Tourism
Natalia Velikova
Marianna Sigala
Marlene Pratt
Joanna Fountain
Texas Tech University, USA
Griffith University, Australia
World Wine Markets
Susan Freeman
ISBN: 978-0-9944460-0-8
All rights reserved. No part of the material protected by this copyright notice may be
reproduced or utilized in any form or by any means, including photocopying and
recording, or by any information storage and retrieval system, without the written permission
of the Ehrenberg-Bass Institute for Marketing Science, University of South Australia.
Author’s Name
Page Numbers of Paper(s)
Agnoli, Lara …………………………………………….173-183
Alampi Sottini, Veronica ……………………………... 96-105
Anderson, Kym………………………………………... 635-644
Atkin, Tom……………………………………………… 301-312
Babin, Barry, J. ……………………………………….. 106-116; 203-212
Bauer-Krösbacher, Claudia …………………………. 598-607
Begalli, Diego …………………………………………. 173-183
Behnke, Carl. A. ………………………………………. 400-407
Benson-Rea, Maureen ………………………………..332-341; 635-644
Bouzdine-Chameeva, Tatiana ………………………. 117-126; 342-352
Brodie, Roderick, J. …………………………………... 332-341; 408-416
Bruwer, Johan ………………………………………… 502-509; 608-620; 621-634
Cadot, Julien ………………………………………….. 1-12
Capitello, Roberta ……………………………………. 50-59; 173-183
Casas-Romeo, Agusti ……………………………….. 518-529; 530-539
Celhay, Franck ……………………………………….. 381-390
Chan, Hin, C.C. ………………………………………. 231-239
Charters, Steve ………………………………………. 154-162; 173-183; 510-517
Chen, Xiaoyu ………………………………………….. 502-509
Chrysochou, Polymeros ………………………………194-202
Cogan-Marie, Laurence ……………………………… 154-162; 510-517
Cohen, Eli …………………………………………….. 283-291
Cohen, Justin …………………………………………. 342-352; 502-509
Conduit, Jodie ……………………………………….... 408-416; 457-465
Conz, Elisa ……………………………………………. 76-85
Corsi, Armando, M. …………………………………... 50-59; 342-352
Crouch, Roberta ……………………………………… 41-49; 313-322; 342-352; 475-483
Culbert, Julie, A. ……………………………………… 184-193
Deker, Johannes ……………………………………… 371-380
De Marchi, Renata …………………………………… 342-352
De Silva, Tracy-Anne ………………………………… 417-426
Denicolai, Stefano ……………………………………. 76-85
Dodd, Tim …………………………………………….. 145-153
Dolan, Rebecca ………………………………………. 447-456; 457-465
Durrieu, Francois ……………………………………... 353-361; 362-370
Dutton, Jacqueline ……………………………………. 554-562
Fahy, John …………………………………………….. 457-465
Fath, Benjamin ………………………………………... 655-666
Fauvy, Stéphane ……………………………………… 240-250
Felzensztein, Christian ………………………………. 655-666
Fleuchaus, Ruth ………………………………………. 371-380
Flint, Daniel, J. ……………………………………….. 427-436
Forbes, Sharon. L. …………………………………… 25-34; 417-426
Fountain, Joanna ………………………………………563-571; 572-581; 582-591
Freeman, Susan ……………………………………… 655-666
Gertosio, Juan, T. …………………………………….. 437-446
Ghvanidze, Sophie …………………………………… 135-144
Author’s Name
Gilinksy, Armand ……………………………………… 13-24
Golicic, Susan, L. …………………………………….. 427-436
Goodman, Steve ……………………………………… 447-456; 457-465; 502-509
Greenacre, Luke ……………………………………… 292-300
Griessbach, Lela ……………………………………… 135-144
Gu, Qiushi …………………………………………….. 549-553
Habel, Cullen …………………………………………. 447-456
Haberstroh, Kristina …………………………………. 342-352
Hammond, Rhonda, K. ……………………………… 400-407
Heimers, Regine ……………………………………… 221-230
Hirche, Martin ………………………………………… 292-300
Holm, Mirjam ………………………………………….. 117-126
Huertas-Garcia, Ruben ……………………………… 518-529; 530-539
Husted, Kenneth ……………………………………… 35-40
Iselborn, Maximillian …………………………………. 60-67; 68-75; 540-548
Jarrett, Stephen ………………………………………. 484-491
Jarvis, Wade ………………………………………….. 484-491
Jaud, David, A. ………………………………………. 391-399
Jorgensen, Jacob, B, ………………………………… 194-202
Karhunen, Hanna, B. ………………………………… 645-654
Katsoni, Vicky ………………………………………… 251-262
Kavoura, Androniki …………………………………... 251-262
Kennedy, Rebecca …………………………………… 25-34
Khan, Jashim …………………………………………. 251-262
King, Brian, E.M. ……………………………………… 549-553
Köhr, Christopher, R. ………………………………… 50-59
Koja, Theresa ………………………………………… 598-607
Korb, David, S. ……………………………………….. 86-95
Kunc, Martin ……………………………………………645-654
Lakotta, Jan …………………………………………… 135-144
Landwehr, Jan, R. ……………………………………. 391-399
Lane, Melissa, J. ……………………………………… 184-193
Lecat, Benoît ………………………………………….. 240-250; 251-262
Lee, Linda, W. ………………………………………… 251-262
Levy, Tomer …………………………………………… 283-291
Livat, Florine ………………………………………….. 272-282
Lockshin, Larry ……………………………………….. 292-300
Loose, Simone ……………………………………….. 68-75; 540-548
Lu, Vinh, N. ……………………………………………. 313-322
Lunardo, Renaud …………………………………….. 353-361; 362-370
Manno, Ann-Marie ……………………………………. 608-620
Manthiou, Aikaterini ………………………………….. 213-220
Mantonakis, Antonia …………………………………. 203-212
Mathis, Julia, K. ……………………………………… 598-607
Mazodier, Marc ………………………………………. 231-239
McGarry Wolf, Marianne ……………………………. 251-262
Medlin, Christopher, J. ………………………………. 332-341
Author’s Name
Melnyk, Valentyna ……………………………………. 391-399
Menghini, Silvio ………………………………………. 96-105
Menival, David ......................................................... 572-581
Merdian, Peter ......................................................... 213-220
Morrish, Sussie, C. .................................................. 466-474
Nemčík, Lukáš ......................................................... 592-597
Nenycz-Thiel, Magdalena …………………………… 292-300
Nesselhauf, Lucas …………………………………… 371-380
Nuebling, Michaela, A. ………………………………. 400-407
Olsen, Janeen ………………………………………… 163-172; 301-312
Orth, Ulrich, R. …………………………………………117-126; 313-322; 342-352
Oyaneder, Lionel, V. …………………………………. 437-446
Pearce, Karma, L. ……………………………………. 184-193
Pelet, Jean-Éric ………………………………………. 240-250; 251-262
Plewa, Carolin …………………………………………. 408-416
Prokeš, Martin ......................................................... 592-597
Proksch, Michael ………………………………………475-483
Qesja, Bora ……………………………………………. 41-49
Qiu, Hanqin …………………………………………… 549-553
Quester, Pascale …………………………………….. 41-49; 475-483
Raab, Gerhard …………………………………………213-220
Remaud, Hervé ………………………………………. 231-239; 272-282; 381-390
Richards, Nicole ……………………………………… 608-620
Ristic, Renata …………………………………………. 184-193
Ritchie, Caroline ……………………………………….127-134
Romero, Patricio, R. ………………………………….. 437-446
Rüger-Muck, Edith ……………………………………. 213-220; 221-230
Rundle-Thiele, Sharyn ……………………………….. 251-262
Ryan, Greg ……………………………………………. 563-571
Scholer, Morten ………………………………………. 263-271
Sellers Rubio, Ricardo ……………………………….. 96-105
Sexton, Amie ........................................................... 323-331
Sigala, Marianna ...................................................... 621-634
Signori, Paola ...........................................................427-436
Skálová, Eva ............................................................ 592-597
Spielmann, Nathalie ………………………………….. 106-116; 203-212
Stern, Stephen …………………………………………492-501
Stöckl, Albert, F. ………………………………………598-607
Stringer, Christina …………………………………….. 655-666
Subirà-Llobera, Esther ………………………………. 518-529; 530-539
Szabo, Zoltan …………………………………………. 60-67
Szolnoki, Gergely …………………………………….. 50-59; 60-67; 540-548
Tari, Katalin …………………………………………… 540-548
Thach, Liz ………………………………………………163-172; 301-312
Tischler, Stephanie …………………………………… 598-607
Ugaglia, Adeline, A. ………………………………….. 1-12
Valderrama, Sergio, M. ………………………………. 437-446
Velikova, Natalia ……………………………………… 145-153; 154-162; 510-517
Author’s Name
Verdonk, Naomi, R. ………………………………….. 184-193
Verghote, Caroline …………………………………… 106-116
Vigar-Ellis, Debbie …………………………………… 251-262
Wagner, Sharon, L. ………………………………….. 86-95
Waye, Vicki …………………………………………… 492-501
Wegmann, Anne Lena ………………………………. 251-262
Wilkinson, John, W. ………………………………….. 184-193
Wilkinson, Kerry, L. ………………………………….. 184-193
Wirtz, Jochen …………………………………………. 117-126
Wittwer, Glyn …………………………………………. 635-644
Wolf, Hannah, L. ……………………………………… 466-474
Woodfield, Paul ………………………………………. 35-40
Yanine, Fernando ……………………………………. 437-446
Zucchella, Antonella …………………………………. 76-85
Contents
COOPERATIVE STRATEGY AND LIQUIDATION IN THE BORDEAUX WINE INDUSTRY
............................................................................................................................................................... 1
STRATEGY AND LEADERSHIP IN U.S. WINE BUSINESSES: 15 YEARS ON .................... 13
COMPETITIVE ADVANTAGE THROUGH DIRECT MARKETING: A CASE STUDY OF A
SMALL NEW ZEALAND WINE BUSINESS ................................................................................. 25
STIMULATING INNOVATION IN FAMILY WINEGROWING FIRMS: KNOWLEDGE
SHARING BETWEEN GENERATIONS ........................................................................................ 35
INNOVATING TRADITIONAL PRODUCTS: “SELF-SACRIFICE VS. PRODUCT
AUTHENTICITY” ............................................................................................................................. 41
IT’S A FAMILY BUSINESS: INVESTIGATING ORGANISATION AND VALUES OF
FAMILY-OWNED WINERIES IN AUSTRALIA, GERMANY AND ITALY ............................. 50
IMPLEMENTING ORGANIC VITICULTURE AS A BUSINESS STRATEGY: A CASE STUDY
............................................................................................................................................................. 60
WHICH SUCCESS FACTORS DRIVE PROFITABILITY OF PRIVATELY OWNED
WINERIES? ....................................................................................................................................... 68
INNOVATION STRATEGIES FOR RESILIENT SMES: A CASE STUDY IN THE ITALIAN
WINE INDUSTRY ............................................................................................................................ 76
THE FINICKY GRAPE WINERY ACTION RESEARCH IN WINE ACCOUNTING ............... 86
AN EXPLORATORY STUDY ON THE PRODUCTIVITY AND EFFICIENCY OF SPANISH
AND ITALIAN WINERIES.............................................................................................................. 96
PERSONALITY MATTERS TO YOUNG WINE CONSUMERS ............................................. 106
ARE DOMINANT WINE COUNSELLORS MORE EFFECTIVE WITH CONSUMERS? .... 117
DID THEY GROW INTO WINE? REVISITING A GEN Y COHORT TO INVESTIGATE
HOW THEIR INTERACTION WITH WINE HAS EVOLVED OVER TIME ........................ 127
BENEFITS CONVINCING WINE CONSUMERS - DEVELOPING A UNIQUE SELLING
PROPOSITION FOR GEORGIAN WINES BASED ON FOCUS GROUP ANALYSIS ......... 135
CHARACTERISTICS, PREFERENCES, AND PURCHASE DRIVERS OF HISPANIC WINE
CONSUMERS IN THE U.S............................................................................................................ 145
CONSUMER KNOWLEDGE AND PREFERENCES FOR WINE AMONGST VISITORS TO
BURGUNDY ................................................................................................................................... 154
MELTING POT OR BLENDED WINE: DOES ETHNICITY STILL MATTER IN
UNDERSTANDING CONSUMER WINE BEHAVIOR? ........................................................... 163
HOW IMPORTANT IS THE CARBON CLAIM IN GENERATION Y ITALIANS’ WINE
CHOICE? ......................................................................................................................................... 173
AUSTRALIAN CONSUMERS’ PERCEPTIONS OF CHAMPAGNE AND OTHER
SPARKLING WINE: AN EXPLORATORY STUDY ................................................................. 184
DANISH CONSUMER PREFERENCES FOR WINE AND THE IMPACT OF
INVOLVEMENT............................................................................................................................. 194
TAKE ME THERE, I’LL LIKE THE PRODUCT MORE........................................................... 203
EMOTIONAL IMPACT OF WINE SELLING WEBSITES: AN INVESTIGATION OF THE
ONLINE PERCEPTION OF WINE WEB STORES................................................................... 213
HOW TO ENGAGE WINE CUSTOMERS ONLINE AND OFFLINE? AN EXPLORATORY
STUDY ............................................................................................................................................. 221
THE IMPACT OF CELEBRITY ENDORSEMENT ON WINE BRANDS’ LIKEABILITY AND
PURCHASE INTENTION: A CHINESE PERSPECTIVE ......................................................... 231
LEARNING WINE THANKS TO POWERFUL MOOC EMULATION .................................. 240
WINE AND WEBSITE LOYALTY: A MODEL OF SALES PROMOTION AND SERVICE
ATTRIBUTES ................................................................................................................................ 251
COFFEE AND WINE: A COMPARISON OF TWO VALUE CHAINS, OWNERSHIP
STRUCTURES AND SUSTAINABILITY STANDARDS ......................................................... 263
FACTORS IMPACTING WINE PRICES’ MARK-UP IN RESTAURANTS........................... 272
SUCCESS MARKETING FACTORS FOR BOUTIQUE WINERIES: PERCEPTION OF WINE
STORE MANAGERS ..................................................................................................................... 283
HOW DO RETAIL DISTRIBUTION AND MARKET SHARE MEASURES RELATE IN THE
WINE CATEGORY? A CONCEPTUAL OUTLINE AND SPECULATION BASED ON
CURRENT KNOWLEDGE............................................................................................................ 292
MARKETING BY WHAT MATTERS: USING SCHWARTZ’S THEORY OF BASIC VALUES
TO IDENTIFY WINE CONSUMER SEGMENTS ...................................................................... 301
FOR THE LOVE OF COUNTRY: HOW ORIGIN-RELATED AFFECT INFLUENCES
CONSUMER WINE EVALUATION AND PREFERENCE ....................................................... 313
THE EMPHASIS ON PEOPLE AND PLACE IN THE IDENTITY AND MARKETING OF
TWO PREMIUM AUSTRALIAN WINERIES ........................................................................... 323
DIAGNOSING THE SUCCESS OF BRAND NEW ZEALAND WINE..................................... 332
DESIGNING CULTURALLY SPECIFIC WINE PACKAGES: THE CASE OF VISUAL
HARMONY ..................................................................................................................................... 342
HOW TO DISCRIMINATE FUN AND EXPLORATORY LABELS FROM TYPICAL
LABELS? ......................................................................................................................................... 353
DESIGNING LABELS TO MAKE CONSUMERS WILLING TO PAY MORE FOR WINES:
THE EFFECTS OF TYPICAL, FUN AND LOCAL FRONT LABELS ON CONSUMERS'
WILLINGNESS TO PAY FOR BORDEAUX WINES................................................................ 362
OLD WINE IN NEW BOTTLES? THE IMPACT OF INFORMATION ON THE
ACCEPTANCE OF INNOVATIVE WINE PACKAGING .......................................................... 371
WHAT DOES YOUR WINE LABEL MEAN TO CONSUMERS? A SEMIOTIC APPROACH
.......................................................................................................................................................... 381
FANTASY THEMES ON WINE LABELS: A GOOD IDEA FOR PRACTITIONERS? ......... 391
DEMOGRAPHICS OF U.S. WINE CONSUMERS: A COMPARISON BETWEEN TWO
DATA COLLECTION APPROACHES ........................................................................................ 400
DEVELOPING RESOURCE INTEGRATION CAPABILITIES IN WINE INDUSTRY R&D
COLLABORATIONS ..................................................................................................................... 408
SUSTAINABILITY: A TALE OF TWO NEW ZEALAND WINERIES ................................... 417
THE TRIPLE BOTTOM LINE IN THE GLOBAL WINE INDUSTRY ................................... 427
A SUSTAINABLE PERFORMANCE MEASUREMENT SYSTEM FOR THE CHILEAN
WINE INDUSTRY'S SUPPLY CHAIN ........................................................................................ 437
COMMUNICATION ORIENTATIONS ON FACEBOOK: HOW DO CONSUMERS
PERCEIVE BRAND POSTS? ....................................................................................................... 447
FACEBOOK FOR WINE BRANDS: AN ANALYSIS OF STRATEGIES FOR FACEBOOK
POSTS AND USER ENGAGEMENT ACTIONS ........................................................................ 457
THIS IS MY PERFECT MATCH! UNDERSTANDING LUXURY WINE CONSUMPTION
.......................................................................................................................................................... 466
TALKING WITH YOU - NOT AT YOU: HOW BRAND AMBASSADORS CAN SPARK
CONSUMER BRAND ATTACHMENT ...................................................................................... 475
DEFINING THE LUXURY WINE CATEGORY VIA AN ASSESSMENT OF PRICE-TIER
PERCEPTIONS .............................................................................................................................. 484
PROBLEMATIC ASPECTS OF THE LEGAL FRAMEWORK FOR PROTECTING
AUSTRALIA’S WINE REGIONS ................................................................................................. 492
WINE TOURISTS’ LOYALTY INTENTIONS: TOWARD AN INTEGRATED BEHAVIOUR
MODEL ............................................................................................................................................ 502
THE DEVELOPMENT OF WINE TOURISM IN LESSER-KNOWN WINE REGIONS: THE
CASE OF JURRA ............................................................................................................................ 510
PLANNING PUBLIC VERSUS PRIVATE INVESTMENT: PENEDES WINE ROUTE
(SPAIN) CASE STUDY: AN EXPLORATION THROUGH THE RESOURCE BASED VIEW
(RBV) .............................................................................................................................................. 518
CASE STUDY: HERITAGE OF THE PRIORAT ....................................................................... 530
SEGMENTATION OF VISITORS IN A GERMAN WINE-GROWING REGION: THE
RHEINGAU AND ITS TOURISTS .............................................................................................. 540
IDENTIFYING FACILITATORS, CONSTRAINTS OF WINE TOURISM FOR OUTBOUND
CHINESE TOURISTS .................................................................................................................... 549
WINEMAKING IN MYANMAR: IDENTITY AND AUTHENTICITY ................................... 554
MOTIVATIONS TO ATTEND A NEW ZEALAND WINE AND FOOD FESTIVAL: THE
ROLE OF INVOLVEMENT .......................................................................................................... 563
THE IMPACT OF NEW ZEALAND VISITATION ON CHINESE PERCEPTIONS OF NEW
ZEALAND WINE ........................................................................................................................... 572
JUST HERE FOR THE SCENERY? CHINESE HOLIDAYMAKERS AND WINE TOURISM
IN NEW ZEALAND ....................................................................................................................... 582
WINE CLUSTER KEY DRIVER OF SUCCESS FOR WINE TOURISM IN THE CZECH
REPUBLIC ...................................................................................................................................... 592
DOES WINE ENHANCE THE ATTRACTIVENESS OF A DESTINATION? ....................... 598
SOURCES OF INFORMATION USED BY WINE TOURISTS PRIOR TO VISITING AN
AUSTRALIAN WINE REGION ................................................................................................... 608
DOES LOCATION OF ORIGIN DIFFERENTIATE WINE TOURISTS? FINDINGS FROM
MCLAREN VALE, AUSTRALIA .................................................................................................. 621
EVOLVING CONSUMPTION PATTERNS AND FREE TRADE AGREEMENTS: IMPACTS
ON GLOBAL WINE MARKETS BY 2020................................................................................. 635
THE CHINESE PREMIUM WINE MARKET AFTER BORDEAUX: OPPORTUNITIES FOR
PORT WINE ................................................................................................................................... 645
EXPLORATION AND EXPLOITATION IN ACCELERATED INTERNATIONALIZATION:
EVIDENCE FROM THE GLOBAL WINE INDUSTRY ............................................................ 655
Cooperative Strategy and Liquidation in the Bordeaux Wine Industry
Adeline Alonso Ugaglia
Bordeaux Sciences Agro, University of Bordeaux, France
[email protected]
Julien Cadot
ISG Paris, France
[email protected]
Abstract:
Purpose: Cross and Buccola (2004) established that if the lenders of cooperatives are not in
position to assess the “right” price to be paid for the raw-material delivered by cooperative
members, these latter may push for a cash transfer which may deteriorate the financial
position of the cooperative. This form of liquidation can be an exit way for cooperatives
which, at the turning point of maturity, do not seek strategic alliances to increase their market
power, or do not shift to a new model, according to the lifecycle approach of Cook (1995).
Design/Methodology/Approach: In this research, we test this hypothesis for cooperatives of
the Bordeaux wine industry. We run two regressions which aim at characterizing the
relationship between leverage and cash transfer to cooperative members according to the
downstream strategy of cooperatives.
Findings: Our results confirm our main hypothesis. The cooperatives which stay in the
traditional form are prone to liquidation: the cash transfer to producers implies a higher
leverage which implies a financial distress.
Implications for practitioners: The financial behavior of cooperatives forming union and of
those which have opted for vertical integration is radically different.
Keywords: Cooperative finance, liquidation, lifecycle approach, wine industry, cooperative
union, vertical integration
JEL Codes: G320, D230, Q130
1|Page
1. INTRODUCTION
A major drawback of the cooperative ownership structure is that cooperative members may
have a lower stake in the future well-being of the firm, as cooperative owner, than in its
present well-being, as cooperative supplier. Cross and Buccola (2004) established that if the
lenders of cooperatives are not in position to assess the “right” price to be paid for the rawmaterial delivered by cooperative members, these latter may push for a cash transfer which
may deteriorate the financial position of the cooperative. The desire to liquidate cooperative
capital is in line with the yardstick competitive hypothesis (Cross et al, 2009), stating that
cooperatives are a temporary mechanism for agricultural producers to fight against the
monopsony power of larger downstream firms (Nourse, 1942). As soon as market efficiency
is “restored”, cooperatives may let the place to IOFs, which, a priori, benefit from a less
costly ownership structure (Hansmann, 1988; Cook, 1995).
However, it appears that a lot of cooperatives do not disappear even when they reach the
turning point of maturity and operate in a competitive market. Cook (1995) extended the
Nourse’s story in considering that cooperatives which have reached this stage face three
options: (1) exit (which is the option given by the yardstick competitive hypothesis); (2)
continue in forming strategic alliances utilized as equity-capital-seeking strategy; (3)
transition by shifting to a new model that tempers the disincentives stemming from the
cooperative ownership structure. If we relate these two lifecycle approaches of cooperatives,
we may conjecture that the liquidation process established by Cross and Buccola (2004) can
be a way for cooperatives to exit while the cooperatives forming strategic alliances or
reinventing themselves have interest to preserve their ability to invest.
In this research, we test this hypothesis in a particular context, the Bordeaux wine industry.
Indeed, the Bordeaux cooperatives seem have reached the turning point of maturity. In 2010,
the Bordeaux wine industry policymakers agreed on a strategic plan to encourage
cooperatives to form union. However, some have succeeded in implementing their own
vertical integration strategy and may have no interest to form union with less efficient
cooperatives. Others appear reluctant to change from the traditional downstream strategy,
which is the sale of bulk wine to negociants (the IOF firms which traditionally blend and
brand the Bordeaux wine destined for the mass-market). It comes that three types of
cooperatives co-exist in the Bordeaux wine industry. They may be categorized according to
their downstream strategy: the “traditional” one, which is the sale of bulk wine to negociants;
the strategic alliance through union; the vertical integration. If we follow the approach of
Cook (1995), the “traditional” cooperative may be prone to liquidation while the cooperatives
in union and those which have chosen downstream integration have interest to preserve their
ability to invest.
2. DETECTING THE COOPERATIVE LIQUIDATION
To detect the cooperative liquidation is an empirical challenge. Indeed, if it were easily
observable, the cooperative lenders could anticipate the financial distress but it appears that
many cooperative bankruptcies have taken their stakeholders by surprise (Cross and Buccola,
2|Page
2004). According to our own knowledge, this idea is relevant for the French wine industry as
well1.
Cross et al. (2009) proposed a method based on a comparison between the price paid to the
cooperative members and the price offered by the investor-owned agribusiness to
characterize the liquidation process. However, we cannot use this method in the Bordeaux
wine industry because investor-owned wineries are still rare in Bordeaux. There is no
“investor-owned-firm contract price” which may serve as a reference to see if the price paid
to cooperative members is excessive or not.
Thus, we propose a different empirical strategy. We observe the relationship between the
debt (LEV) and the price paid to producers (P) through two different econometric
specifications. In the first one we consider the impact of the price paid to producers on the
cooperative debt. The cooperative debt is the dependent variable and we use a lagged proxy
of the price paid to producers (PN-1) in order to prevent endogeneity. Our control variables
(CV) are the ratio of net to gross assets as a proxy for investment and the value of the wine
processed by the cooperative (the output price). Moreover, we focus on three debt variables:
(i) the ratio of the medium and long term debt on equity (the medium and long term
leverage), (ii) the ratio of short term debt on sales, (iii) the ratio of financial debt on equity
(the total leverage). In the second specification, the price paid to producers is the dependent
variable and the lagged proxy of debt is the explanatory variable. The control variable is the
output price.
According to our main hypothesis, the relationship between the debt and the price paid to
producers should differ according to the downstream strategies (DS) of the cooperatives. We
use cross-variables to highlight the phenomenon (see the equations of specification below). In
the general model (1), as the “traditional” cooperatives are prone to the liquidation process,
we should observe a positive relationship between the price paid to producers and the
leverage (
: all else equal, the cooperative members prioritize their current payments
against their mid-term financial prospects. For the other cooperatives, the relationship
between the price paid to producers and the debt can be negative if they face financial
constraints or null if they don’t.
We expect more ambiguity in the second general model (2). Indeed, even if cooperative
members intend to use the leverage as a source of cash, the repayment due to the past
leverage may act as a constraint on the cash transfer and so imply a lower price paid to
producers. In so forth, a negative impact of past leverage on the price to producers may
indicate a financial distress. That may be a consequence of a liquidation process. A positive
impact may indicate that the access to debt financing can be used to increase the cash transfer
to producers. That can be related to financial constraints or enlighten an extreme form of
liquidation.
1
See for example the cases of the cooperative of Cayranne and the cooperative of Mont Tauch. The latter one
had been cited as an example of proactive cooperative by policymakers just before its tremendous bankruptcy
(see Abhervé, 2014).
3|Page
(1)
(2)
3. DATA
In 2010, the Bordeaux wine region encompasses 7 400 farms cultivating vineyards, with
5 700 farms specialized in wine growing. The vineyard covers 124 000 ha (about 50% of the
Gironde agricultural area) and generates 90% of the county agricultural value. 2 460 winegrowers are cooperative members. They operate 24 279 ha, i.e. 20% of the Gironde vineyard.
The 39 Bordeaux cooperatives process about 36% of the 5.8 million hectoliters of the wine
produced in Gironde. The average size of farms exclusively making wine with the
cooperative is about 10 ha (DRAAF, 2011).
Thanks to a partnership between the professional organizations of the Bordeaux wine
industry and the faculty of Bordeaux Sciences Agro, we were able to gather data on all
Bordeaux cooperatives, i.e. the 39 cooperatives existing at the time of the collection of data.
The uniqueness of our database is due to the mix of production data and financial data which
were collected through a survey addressed to the accountants of cooperatives. We asked them
to collect data over a six-year period. This enables us to proxy the price paid to producers by
dividing the cost of raw materials by the volume of the production processed. It also provides
a proxy of the average price of the wine sold by the cooperative (the output price) and
information on the distribution channel used by the cooperative through the volume sold in
bulk to negociants, the volume transferred to a union and the volume sold in bottles.
We consider that the downstream strategy is: (i) traditional, when cooperatives have not
implemented a union nor a vertical integration strategy; (ii) union when more than 30% of
turnover is done by sales to a union; (iii) vertical integration when bottled wine represents
more than 30% of the turnover. Table 1 displays general statistics and table 2 focuses on the
variables used for the regression models.
Table 1. Size, sales and downstream strategy
Number of members
Area (ha)
Sales (euros)
Obs
57
76
76
Mean
69
524
3,147,210
Traditional
Min
30
125
416,569
Max
185
1,935
14,600,000
Obs
29
35
35
Mean
77
785
4,351,052
Union
Min
33
100
466,085
Max
208
2,560
15,200,000
Obs
73
102
102
Mean
134
647
7,170,552
Vertical Integration
Min
12
30
462,991
Max
549
3,671
25,400,000
Obs
159
213
213
Mean
100
626
5,271,695
Total
Min
12
30
416,569
Max
549
3,671
25,400,000
Note: observations are cooperative-year, e.g. 39 cooperatives over a six year period (2005-2011)
4|Page
In table 2, we can observe that the leverage ratios do not seem different according to the
downstream strategies of cooperatives, except for the short-term debt which is likely lower
for ‘traditional’ cooperatives. However, one striking point is that the minimal sale price is
lower than the minimal price paid to producers in the category of “traditional” cooperatives.
That illustrates an extreme case of cash transfer from the cooperative to cooperative members
which should result in negative retained earnings. We also observe that the average output
price of cooperatives in union is not different from the output price obtained by traditional
cooperatives. The same is observed for the price paid to producers.
Table 2. Price to producers, leverage, sale price and asset renewing
Price paid to
producers
(euros/hl)
Medium
Total
Short-term
Sale Price
and Long- leverage
debt
on (euros/hl)
term
(%)
sales (%)
leverage
(%)
Obs
71
71
71
74
71
Mean
73
45
79
10
105
Traditional
Min
45
2
2
0
30
Max
132
141
441
108
189
Obs
35
35
35
35
29
Mean
74
37
69
20
105
Union
Min
43
0
12
0
62
Max
123
135
184
123
170
Obs
50
102
102
102
29
Vertical
Mean
105
48
116
28
131
Integration
Min
46
0
4
0
91
Max
223
211
858
162
255
Obs
156
208
208
211
129
Mean
83
45
96
21
111
Total
Min
43
0
2
0
30
Max
223
211
858
162
255
Note: observations are cooperative-year, e.g. 39 cooperatives over a six-year period (2005-2011)
Ratio of net
assets
on
gross assets
(%)
69
36
6
100
35
29
6
96
35
33
10
53
139
34
6
100
_____________________________________________________________________________
4. RESULTS
We present the results of our multivariate analysis (we apply a feasible generalized least
square approach adjusting for heteroscedasticity and autocorrelation) in six tables. The first
three tables present the results for the first econometric specification according to the three
different proxies of debt: medium and long term leverage; short-term debt; total leverage. In
the same manner, the following three tables present the second econometric specification
according to the three proxies of debt.
In the table 3, the cross variable shows that the medium and long term leverage increases
with the price paid to produces for traditional cooperatives while the link is negative for
cooperatives in Union and not significant for cooperatives which have chosen vertical
integration. This difference in the behavior of cooperatives provides is in line with our
hypothesis: the cooperative members prioritize their current payment against the financial
mid-term prospects. Reversely, the cooperatives in union seem to anticipate the future
5|Page
financial requirements in reducing the price to producers (implying more retained earnings)
before increasing their leverage.
Table 3. Effect of the price paid to producers on the medium and long term debt
leverage, by downstream strategies of cooperatives
Traditional
PN-1*Traditional
(1)
MLT leverage
-1.58
(-0.74)
(2)
MLT leverage
(3)
MLT leverage
0.05**
(2.57)
Union
4.30**
(2.17)
PN-1*Union
-0.04**
(-2.02)
Vert. Integration
-3.22
(-1.16)
PN-1*Vert.
Integration
-0.03
(-0.86)
PN-1
0.13**
(2.26)
0.16***
(2.76)
0.14**
(2.04)
Asset renewing
0.94***
(8.76)
0.95***
(9.05)
0.88***
(8.52)
0.04
(1.29)
0.07**
(2.27)
0.03
(0.90)
-3.62
(-0.56)
100
106.78***
-7.66
(-1.12)
100
104.08***
0.80
(0.12)
100
108.33***
Output price
Constant
N
Wald statistics
z statistics in parentheses
* p<0.10, ** p<0.05, *** p<0.01
In table 4, we observe that the link between the price paid to producers and the level of short
term debt is exactly the opposite than what we observe in the table 1. We can explain that by
the very different nature of nature between the short-term and the long term debt. Indeed,
short-term debt is a consequence of the economic and financial situation of the cooperatives
while the long-term debt is a decision of cooperatives. As a result, an interpretation of the
result is that the less the ‘traditional” cooperatives pay the producers, the more they appeal to
short-term debt. It may denote a situation of financial distress. Again, we observe an opposite
link for the cooperatives in union. In this case, the more the cooperative pay the producers,
the more they need short-term debt. This is a direct consequence of the cash transfer from the
cooperative to the producers, a behavior which needs to be kept in control by the bank in
order to avoid financial distress.
6|Page
Table 4. Effect of the price paid to producers on the ratio of short-term debt on sales, by
downstream strategies of cooperatives
Traditional
PN-1*Traditional
(1)
ST debt on sales
-2.77
(-0.79)
(2)
ST debt on sales
(3)
ST debt on sales
-0.11**
(-2.56)
Union
3.10
(0.79)
PN-1*Union
0.12**
(2.55)
Vert. Integration
6.52
(1.35)
PN-1*Vert.
Integration
-0.04
(-0.64)
PN-1
0.17**
(2.27)
0.15**
(2.19)
0.18**
(2.05)
Asset renewing
0.45***
(4.27)
0.52***
(4.53)
0.52***
(4.89)
Output price
-0.09**
(-2.11)
-0.05
(-1.31)
-0.09**
(-2.24)
-0.56
(-0.08)
102
44.45***
-13.45**
(-2.04)
102
39.78***
-8.85
(-1.07)
102
33.87***
Constant
N
Wald statistics
* p<0.10, ** p<0.05, *** p<0.01
Table 5 includes short-term and long-term debt in the same proxy of debt. We have seen that
the link between these two types of debt and the price paid to producers are very different. In
this table, we can only conclude that the link between short-term debt and the price to
producers dominate in the regression.
7|Page
Table 5. Effect of the price paid to producers on the ratio of total leverage, by
Traditional
PN-1*Traditional
(1)
Total leverage
-5.49
(-1.33)
(2)
Total leverage
(3)
Total leverage
-0.11***
(-2.59)
Union
6.07
(1.51)
PN-1*Union
0.11***
(2.78)
Vert. Integration
0.02
(0.38)
PN-1*Vert.
Integration
0.00
(0.14)
PN-1
0.16
(1.06)
0.15
(0.96)
0.08
(0.46)
Asset renewing
2.74***
(16.31)
2.67***
(13.58)
2.62***
(12.37)
Output price
-0.02
(-0.38)
-0.01
(-0.19)
-0.03
(-0.44)
-16.89
(-1.29)
100
305.12***
-29.80**
(-1.97)
100
236.57***
-16.98
(-1.11)
100
158.23***
Constant
N
Wald statistics
* p<0.10, ** p<0.05, *** p<0.01
In table 6, we see that the level of long-term debt has a negative impact on the price paid to
producers for traditional cooperatives. Considering the table 1 and the table 2, this may reveal
a situation of financial distress due to a liquidation process: the higher the cooperatives
transfer cash to the producers, the higher they increase the leverage of the cooperatives. And
the higher the cooperatives are leverage, the lower the cooperatives can offer an attractive
price to producers. In other words, we would observe the consequence of the liquidation
process: the level of medium and long term leverage has a direct consequence on the ability
of the cooperatives to pay the producers. We observe no significant effect of leverage on the
price paid to producers for the other types of cooperatives.
8|Page
Table 6. Effect of the past medium and long term leverage on the price paid to
producers, by downstream strategies of cooperatives
Traditional
MLT Lev.N1*Trad.
(1)
Price paid to
producers
3.04
(0.93)
(2)
Price paid to
producers
(3)
Price paid to
producers
-0.12*
(-1.93)
Union
-4.24
(-1.23)
MLT Lev.N1*Union
0.04
(0.54)
Vert. Integration
2.37
(0.55)
MLT Lev. N-1
*Vert. Integration
0.05
(0.66)
MLT Lev. N-1
0.14**
(2.55)
0.03
(0.62)
0.04
(0.82)
Output price
0.17***
(4.23)
0.16***
(3.85)
0.13***
(3.58)
Constant
52.11***
(9.02)
98
33.60***
57.83***
(10.86)
98
17.08**
58.01***
(12.09)
98
25.67***
N
Wald statistics
* p<0.10, ** p<0.05, *** p<0.01
In table 7, we see that the short-term debt has a negative impact on the price paid to
producers for ‘traditional’ cooperatives. This is consistent with the idea that the financial
distress leads cooperatives to lower the cash transfer to producers. One interesting point is
that the access to short-term debt leads vertically integrated cooperatives to offer higher price
to their producers, which may be interpreted either an opportunistic behavior of cooperative
members against the bank, or a credit rationing which constrain the cooperatives to deliver
the optimal price to their producers.
9|Page
Table 7. Effect of the past short term debt on the price paid to producers, by
Traditional
ST debt. N-1*Trad.
(1)
Price paid to
producers
-2.70
(-1.20)
(2)
Price paid to
producers
(3)
Price paid to
producers
-0.23*
(-1.87)
Union
-4.18
(-1.19)
ST debt. N-1
*Union
0.05
(0.29)
Vert. Integration
2.97
(1.19)
ST debt. N-1
*Vert. Integration
0.26*
(1.84)
ST debt. N-1
-0.03
(-0.28)
-0.13
(-1.41)
-0.20**
(-2.26)
Output price
0.18***
(5.22)
0.18***
(4.81)
0.16***
(4.45)
Constant
58.80***
(12.40)
101
49.76***
57.67***
(13.16)
101
27.05***
58.25***
(14.30)
101
44.47***
N
Wald statistics
* p<0.10, ** p<0.05, *** p<0.01
In table 8, we observe that the debt has a negative impact on the price paid to producers for
“traditional” cooperatives. This shows that the financial situation of these cooperatives is
precarious: debt has a direct and significant effect on the cash transfer to producers.
Reversely, for vertically integrated cooperatives, the access to debt impact positively the cash
transfer to producers. That confirms the result obtained in the table 5. The interpretation is the
same.
10 | P a g e
Table 8. Effect of the past total leverage on the price paid to producers, by downstream
strategies of cooperatives
Traditional
(1)
Price paid to
producers
3.53
(1.18)
Tot. Lev. N-1
*Trad.
(2)
Price paid to
producers
(3)
Price paid to
producers
-0.11***
(-3.20)
Union
-6.18*
(-1.67)
Tot. Lev. N-1
*Union
0.03
(0.57)
Vert. Integration
-2.64
(-0.64)
Tot. LevN-1 *Vert.
Integration
0.12**
(2.43)
ST debt. N-1
0.06*
(1.72)
-0.04*
(-1.89)
-0.06***
(-3.60)
Output price
0.16***
(4.79)
0.18***
(4.54)
0.12***
(3.92)
Constant
55.97***
(10.20)
98
51.56***
59.84***
(12.68)
98
27.57***
64.29***
(16.30)
98
51.92***
N
Wald statistics
* p<0.10, ** p<0.05, *** p<0.01
5. CONCLUSIONS
Our empirical strategy shows that cooperative liquidation, in the sense of Cross and Buccola
(2004), may be the concretization of the choice of exit, in the sense of Cook (1995), by the
cooperatives which do not consider their futures through alliances or new models.
Our methodology requires an a priori categorization of cooperatives according to the risk of
liquidation. This is a drawback if we want a tool to detect the risk of liquidation. However,
this may provide interesting results regarding the evaluation of the structures or the strategic
choices of cooperatives. In our research, we show that “traditional” Bordeaux wine
cooperatives are effectively prone to a liquidation process, as higher payment lead to higher
debt, which may lead to financial distress and, in fine, low payment to producers. By contrast,
vertically integrated cooperatives, or cooperatives in union are in more standard relationship
with the bank, where the dominant effect is that reduced financial constraints through access
to short-term debt lead to higher payment to producers.
11 | P a g e
References
Abhervé, M. (2014) 'Mont Tauch, une cooperative viticole condamnée par le Crédit
Agricole', Alternatives Economiques, 19 Avril 2014, [online] http://alternativeseconomiques.fr/blogs/abherve (Accessed 23 December 2014).
Cross, R. and S. Buccola, 2004. ‘Adapting Cooperative Structure to the New Global
Environment’, American Journal of Agricultural Economics, Vol. 86 n°5, pp.1254-1261.
Cross, R.M., Buccola, S.T. and E.A. Thomann, 2009. ‘Cooperative Liquidation Under
Competitive Stress’, European Review of Agricultural Economics, Vol. 36 (September 2009),
pp.369 – 393.
Cook M. L., 1995. ‘The Future of US Agricultural Cooperatives: A Neo-Institutional
Approach’, American Journal of Agricultural Economics, 77(5): 1153–1159.
CIVB (Comité interprofessionnel des vins de Bordeaux), 2010. Le plan « Bordeaux
demain » : l’essentiel d’une stratégie de reconquête, Bulletin presse des vins de Bordeaux
n°4, octobre/novembre 2010, 67p.
Nourse E. G., 1942. ‘The Place of the Cooperative in our National Economy’. Reprint from
American Cooperation 1942 to 1945, Journal of Agricultural Cooperation, Vol. 7 (1992),
pp.105-111.
12 | P a g e
Strategy and Leadership in U.S. Wine Businesses: 15 Years On
Armand Gilinsky, Jr.
Sonoma State University, U.S.A.
[email protected]
Robert Eyler
Sonoma State University, U.S.A.
[email protected]
Abstract:
Purpose: This investigation compares and contrasts results from a 2015 investigation into
strategy and leadership in US wineries with data from a 1999 survey.
Design/methodology/approach: Meta-analysis of gaps in prior wine business research, 20002015. Survey instrument using structured questions sent via Internet to a database of 11,784
wineries from the Unified Grape and Wine Symposium mailing list, yielding 338 usable
responses.
Findings: Economic cycles and laws and regulations are consistently critical challenges,
while climate change has emerged as a major concern. Respondents report remarkable
stability in performance indicators (growth in sales, profits, and employees), as well as no
major changes in strategic responses to challenges in their competitive environments.
Implications for practitioners: Developing skills in marketing, entrepreneurial thinking,
strategic planning, and negotiation is of paramount importance for practitioners - and
educators of the next generation of wine business leaders.
Keywords: Strategy, Leadership, Decision making, Wine business education
13 | P a g e
1.
IMPORTANCE OF THIS INVESTIGATION
The core content of a strategy includes a diagnosis of the situation at hand, the creation or
identification of a guiding policy for dealing with the critical difficulties, and a set of
coherent actions (Rumelt, 2011: 79). In the global wine industry, for example, superior
leadership and strategy execution are said to be the highest predictors of sustainable growth
(Remaud and Couderc, 2006; Swaminathan, 1995; Taplin, 2006). The wine industry has
weathered boom and bust and recovery cycles over the 2000-2015 period. When facing
challenges in the external and competitive environment, however, it is vastly more difficult to
invest time and money in a new direction (Jordan et al., 2007; Sull, 2009). In a recession, for
example, it is difficult for businesses to consider learning new managerial skills (Gulati et al.,
2010). So, “the time to learn is when things are going well” (Wells, 2010: 31). In other
words, the moment to formulate and implement a strategy is before you realize you need one
(Rhodes and Stelter, 2009; Wells, 2010: 5). How can a manager become more inspirational
and resilient, or at least deter overconfidence about environmental conditions and changing
competitor power? (Kahneman, 2011; Sull, 2009) The answer: via learning how to build or
acquire knowledge resources and capabilities that will stand the test of time, i.e. crafting a
sustainable competitive advantage (Nguyen and Slater, 2010).
An earlier investigation, based on a random sample of the universe of Northern California
wineries in 1999, informed wine business research and pedagogy at the birth of an
undergraduate wine business strategy concentration (Gilinsky et al. 2000). Today, that
program has reached adolescence and evolved into newer MBA and executive programs
involving wine business curriculum. To what extent have there been major changes in wine
business strategy and leadership, as well as wine company performance (e.g. sales, profits,
staffing) over the intervening years? On what areas should wine business researchers and
practitioners focus for the foreseeable future?
Following is a review of empirical research into wine business leadership and strategy,
featuring a meta-analysis of the wine business literature to identify important gaps. We then
present the survey methodology and findings to guide further research and practice. The
Appendix presents the survey instrument used in this investigation.
2.
LITERATURE REVIEW
There has been an explosion of research into wine industry business practices over the past
15 years, accompanying the proliferation of specialist peer-reviewed journals in the field (e.g.
International Journal of Wine Business Research (previously the International Journal of
Wine Marketing), Journal of Wine Research, Journal of Wine Economics, and Wine
Economics & Policy). In addition, research specific to the wine industry has also appeared in
more general business journals (e.g. British Food Journal, Business & Society, Journal of
Cleaner Production, MIT Sloan Management Review).
14 | P a g e
Table 1 presents a meta-analysis of published research, by subject area and journal title, from
the specialist journals during the period of January 2000 – June 2015. This was accomplished
inspection of tables of contents back issues of all of the journals via online library databases
such as Ebsco and ABI/Inform and Emerald. While prior wine business researchers have
investigated numerous issues, the number of studies with a focus on management have been
comparatively few (18 or about 3 percent) in relation to the host of studies about wine
marketing (38 percent), economics (18 percent), production/operations (14 percent), tourism
(5 percent), and sustainability (4 percent).
Table 1 — Wine Business Research in Specialist Journals, 2000 – 2015
(Ranked by frequency in each subject area)
Primary subject area/topic
IJWM IJWBR JWE JWR WEP
TOTAL* % of total
Marketing
60
81
23
63
15
242
37.5
Economics
18
15
52
25
3
113
17.5
2
3
4
79
3
91
14.1
Case study / Industry history
23
13
34
17
1
88
13.6
Tourism
15
8
0
6
3
32
5.0
Sustainability
0
5
2
15
5
27
4.2
Finance
0
6
10
2
1
19
2.9
Management
5
5
0
6
2
18
2.8
MIS/ E-commerce
8
7
0
0
0
15
2.3
131
143
125
213
33
645
100.0%
Production / Operations
TOTALS, BY JOURNAL
*Through 30 June 2015, excludes articles in press.
Names of journals:
IJWM = International Journal of Wine Marketing (1989-2006), succeeded by IJWBR in 2008.
IJWBR = International Journal of Wine Business Research, published by Emerald since 2008.
JWE = Journal of Wine Economics, published online by American Assoc. of Wine Economists since 2006.
JWR = Journal of Wine Research, published in print and online by Taylor & Francis since 1990.
WEP = Wine Economics and Policy, published online by Elsevier since 2012.
Source: Authors' examination of journals' tables of contents, abstracts, and key words in tables of contents in
library databases such as EBSCO, ABI/Inform, and Emerald.
15 | P a g e
The most recent studies of wine industry management, of which leadership and strategic
management are a subset, report a number of important strategic learning needs and
leadership capabilities. Small Australian producers need to focus less on developing technical
expertise and more on financial acumen, strategic ability, marketing knowledge, HR
planning, and general management skills (Aylward and Clements, 2008; Charters et al.,
2008). Chilean producers need to foster collaboration in marketing activities and shared
access to information and technologies (Felzenzstein and Deans, 2013). French producers
need to make investments in quality, overcome labor difficulties, manage team differences,
reposition brands in the marketplace, and build trusted customer relationships (BouzdineChameeva, 2006; Mora 2006). The Spanish wine industry needs to intensify efforts to
improve infrastructure, marketing and education to assist producers to confront challenges
and achieve long-term survival (Alonso and Liu, 2012). US producers need to understand the
marketplace, learn agricultural and consumer cycles, develop people and communication
skills, and share best practices via intra-industry coalitions and networks — working for the
industry as a whole — rather than merely for the self-interest of their particular firms (Brown
and Butler, 1995; Gilinsky et al., 2000).
3.
METHODOLOGY
The current investigation replicates an anonymous cross-sectional survey of wine business
leaders (Gilinsky et al., 2000). The 1999 random sample was constructed from a database of
368 firms listed in the Wines & Vines (1999) and Wine Business Monthly’s Wine Industry
Directory and Almanac (1996). In 2015, the universe consisted of 11,784 wine businesses
from the Unified Wine and Grape Symposium mailing list of United States wine producers.
In 1999, the questionnaire was 20 pages in length and organized into four sections: 1) the
business and its demographic characteristics; 2) perceptions of environmental opportunities
and threats; 3) perceptions of critical leadership characteristics and strategic and competitive
best practices; and 4) self-reported performance over the past three years. For the 2015 data
collection effort, a condensed version of the earlier survey instrument was created, retaining
the same demographic, perceptual, best practices, and performance questions, but reduced
from 80 to 15 questions (available from authors upon request). Internet survey software
(SurveyMonkey) replaced mailings of paper questionnaires via the U.S. Postal Service. The
response rate for the 1999 study — after three mailings — was 22.6% or 83 firms, while the
response rate in 2015 — after two e-mailings — was 2.9%, or 338 firms. The lower response
rate is possibly attributable to the fact that wine business research has grown exponentially as
shown previously in Table 1, and the industry has become inundated with surveys.
4.
FINDINGS AND DISUSSION OF RESULTS
Respondents in 2015 are predominantly smaller producers: 80 of the respondents annually
produce more than 100,000 9L cases (12 x 750 mi bottles); 88 respondents produce between
5,000 and 100,000 cases, and 124 produce less than 5,000 cases. Privately held wineries
represent 89 percent of respondents; nine percent are publically held and two percent are
16 | P a g e
cooperative wineries. Figure 1 shows the age of the wineries. Table 2 shows self-reported
performance indices for the three years prior to survey completion in 1999 and 2015.
Figure 1: Respondent Business Age, Years, 1999 and 2015
Table 2: Prior Three Years’ Performance, 1999 vs. 2015
1999
Increased Decreased
Stable
Sales growth
82.9%
9.8%
7.3%
Profit growth
84.2%
8.5%
7.3%
Employee growth
56.1%
40.2%
3.6%
Sales growth
81.8%
5.2%
13.0%
Profit growth
73.8%
4.8%
21.4%
Employee growth
42.3%
8.1%
49.6%
2015
4.1
Strategic challenges
Strategic challenges are represented by critical challenges, environmental forces, and
managing challenges. Critical challenges are consistent with those from the 1999 survey,
suggesting how little the wine industry has changed in terms of its perceptions of the major
challenges (see Table 3). For privately held firms, the majority of critical challenges are
regulation and taxes, distributor control, and building customer relationships and databases.
Managing and building customer databases is of highest importance for public companies —
customer acquisition may be viewed as a path to higher valuations in the stock market.
17 | P a g e
Younger firms appear to have expressed greater concern about economic cycles than older
firms, which are more concerned with consumer demographics. Environmental forces, shown
in Table 4, somewhat reflect those in the 1999 survey: regulations and economic factors
remain dominant, albeit climate change has emerged as a concern for over 1/3 of the
respondents. As shown in Figure 2, strategic responses are split among the choices provided
in the survey, likely a reflection of how breadth of management styles and strategic options
has grown since 1999. Although neither staff size nor age appear to moderate strategic
response, production capacity does have an impact: smaller wineries (those producing less
than 5,000 cases) focus more on training, skills, and management control than do larger
wineries, which is intuitive inasmuch as that small producers typically are characterized by a
“hands-on” approach by management and ownership.
Table 3: Critical Challenges, 1999 vs. 2015
Top Three Challenges for My Business
1999
2015
Marketing
60%
Marketing
34%
Channel competition/distribution
58%
Channel competition/distribution
22%
Government regulation
45%
20%
Table 4: Environmental Forces, 1999 vs. 2015
Most Important Force Impacting My Business
1999
2015
Increasing costs
60%
Climate change
34%
Entry of larger rivals
58%
Economic cycles
22%
45%
20%
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Figure 2: Strategic Responses to Challenges, 1999 vs. 2015
4.2
Leadership characteristics
Consistent with the 1999 survey, we investigated how wine industry leaders felt about their
own characteristics and how they got into leadership positions. Skills, vision, and
achievement are again rated highest as leadership characteristics as shown in Table 5.
Table 5: Skills for Future Leaders, 1999 vs. 2015
Top Five Skills
1999
5.
2015
Finance & accounting
94%
Finance & accounting
14%
Marketing
92%
Marketing
14%
Operations
82%
Negotiation/bargaining
13%
Talent management
81%
Strategic planning
13%
Strategic planning
79%
Entrepreneurial thinking
12%
CONCLUSIONS AND FUTURE RESEARCH DIRECTIONS
Based on a first-cut examination of the above data, the United States wine industry appears to
be characterized by remarkable stability or some might say lack of dramatic changes, at least
in terms of performance indicators, strategic management issues, and desired leadership
qualities, regardless of changes in the external environment. Over the fifteen years between
investigations, economic cycles and laws and regulations remain as critical challenges, while
19 | P a g e
climate change is emerging as a major concern. Respondents note no major changes in
strategic responses to challenges in their competitive environments. Developing skills in
marketing, entrepreneurial thinking, strategic planning, and negotiation continue to remain
paramount for practitioners — and educators — of the next generation of wine business
leaders. Surprisingly, given the emergence of Internet channels, direct-to-consumer
marketing and the use of big data to understand changes in consumer behavior, technology
prowess is of lesser importance than finance and accounting skills. Marketing and operations
skills are most highly sought by smaller wineries; larger producers indicated a tendency to be
more fraught with talent management issues. As indicated by the meta-analysis of the
literature above, the winery management area (including human resources and information
systems management) remains a relatively understudied field. As respondents’ country of
origin in these investigations is solely American wineries, expanding this investigation via
collaborations with researchers in other regions could increase understanding of regional
differences, permit comparisons among producing nations and help pinpoint research and
pedagogy to meet the specific regional needs of wine producers across the globe.
Bibliography
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18, No. 2, pp. 139 – 149.
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21 | P a g e
APPENDIX
Survey Instrument Used in This Investigation
I. Company Information
1.
Ownership [Circle one.]
2.
Number of years in business:
3.
Number of employees:
4.
Primary location / appellation of origin:
5.
PRIVATE
PUBLIC
COOPERATIVE
Number of 12 x 750 ml cases produced (please check one response):
_______
< 5,000
_______
5,001 – 10,000
_______
10,001 – 20,000
_______
20,001 – 50,000
_______
50,001 – 100,000
_______
100,000 – 1,000,000
_______
1,000,001 +
II. Strategic challenges
6.
Which of the following do you see as the most critical challenges facing your company / industry today?
(Choose top 3)
a.
b.
c.
d.
e.
f.
g.
7.
Which of the following environmental factors (regulatory, macroeconomic, geopolitical, etc.) has the
MOST impact on your business today? (Choose top 3)
a.
b.
c.
d.
e.
f.
g.
8.
Regulations and taxes
Distributor control
Global competition
Managing and building customer relationships, brand awareness
Access to capital
Succession planning
Other:
[open-ended answer]
Climate change
Economic cycles
Laws and regulations
Cross-industry competition (other beverages)
Technological innovation
Consumer demographics
Other:
[open-ended answer]
How do you (or did you) manage (or overcome) these challenges? (please check one response)
22 | P a g e
a.
b.
c.
d.
e.
f.
g.
Changed our organizational structure
Changed our management style
Changed our staffing (increased or decreased)
Changed our training and skills
Changed our systems for management control, procedures, etc.)
Integrated our supply chain (Direct to Consumer expansion (DTC), supplier acquisition, etc.)
Other:
[open-ended answer]
III. Leadership characteristics
9.
How does someone come to be recognized as a leader in this industry? (please check one response)
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
10.
Which business skills will leaders need to develop in order to compete successfully in the future? (please
check one response)
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
11.
Education
Skills
Background
Vision
Style
Strategy
Achievements
Intangibles
Some event
Other?
Operations
Marketing
Information Tech
Finance/Accounting
Talent Management
Scientific knowledge
Presentation Skills
Statistical Analysis
Sales Experience
Strategic Planning
Entrepreneurial Thinking
Foreign Languages
Social Media Savvy
Negotiations/Bargaining
Which core values are needed in order to compete successfully in the future? (Choose top 3)
a.
b.
c.
d.
e.
f.
Commitment to environment
Commitment to community development
Commitment to employee well-being
Commitment to preserve the business for successive generations
Commitment to dealing fairly with suppliers and customers
Commitment to honesty and integrity
IV. Performance characteristics
12.
My firm’s last three years’ sales: (Check the appropriate trend description below)
____ Increased over previous three years
____ Declined from previous three years
____ Was about even with previous three years
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13.
My firm’s last three years’ profits: (Check the appropriate trend description below)
14.
My firm’s last three years’ growth in total employees: (Check the appropriate trend description below)
15.
My firm’s last three years’ charitable activities: (Check as many of the appropriate trend descriptions
below that apply)
____ Donated proceeds from events held at my winery
____ Donated wine to auctions and other events
____ Donated a percentage of revenues from wines sold
____ Donated a percentage of profits from wines sold
____ Created a special brand or label linked to a specific charitable cause
____ Other: [open-ended answer]
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Competitive advantage through direct marketing:
A case study of a small New Zealand wine business
Sharon L. Forbes
[email protected]
Rebecca Kennedy
[email protected]
Abstract:
Purpose: This paper examines the various channels used by one small New Zealand wine
business to sell directly to consumers and presents the advantages they gain by adopting
these direct marketing strategies.
Design/methodology/approach: An interview with the owner-manager of a small wine
business was used to gather primary data about their marketing strategies.
Findings: This study illustrates how a small wine business is able to earn ninety-five percent
of their total revenue through direct marketing channels such as events or functions,
online/email sales and the cellar door. Findings suggest that the business has gained several
competitive advantages through their use of direct marketing channels, including control of
pricing, higher profit margins, efficiencies in distribution and communications, reduced risk
through less reliance on intermediaries, and enhanced customer relationships leading to
potential loyalty and future business.
Practical implications: This case study provides information about how to sell wine directly
to consumers and this may benefit other small wine businesses who want to achieve a
competitive advantage through the adoption of similar marketing strategies.
Keywords: wine, direct marketing, distribution strategies, competitive advantage
25 | P a g e
1. INTRODUCTION
The majority of wine produced today is sold indirectly through supermarkets and other large
retailers. This may not be an ideal marketing channel for smaller wine businesses, as they
cannot supply the required volumes and compete with larger global brands. In addition, large
retailers hold considerable power over smaller suppliers and thus control pricing. Many
wineries use a combination of both indirect and direct marketing channels to sell wine. This
paper provides an in-depth case study of a small wine business in New Zealand that is selling
almost all of its wine through direct marketing channels in order to gain a competitive
advantage. The paper begins with an examination of the literature relating to direct
marketing channels, specific marketing channels in the global wine industry, and the
relationship between direct marketing and competitive advantage. The next sections detail
the method, before the results, discussion and conclusions are presented.
2. LITERATURE REVIEW
Direct marketing can be viewed as a channel of distribution typically linking a seller and a
buyer. This type of distribution strategy leads to disintermediation, or the elimination of
supply chain middlemen. Direct marketing establishes an exchange relationship with a
customer in which the usual supply chain intermediaries are omitted (Baron et al., 1991).
Some direct marketing channels, such as farmers markets or cellar doors, use direct selling
methods (i.e. face-to-face sales), whilst other direct marketing channels do not use direct
selling (e.g. internet or email sales). Moller and Halinen (2000) refer to direct marketing as a
practice aimed at enhancing the efficiency of marketing activities (including communications
and distribution) and building loyal, profitable customers. The term direct marketing is often
linked to both ‘relationship marketing’ and ‘database marketing’. Relationship marketing is
about the creation of long-term, profitable relationships with customers; these relationships
may be created and maintained through personalised communications to customers. The
practice of communicating and selling directly may rely on the use of a database of customer
data, hence the linkage to the term ‘database marketing’. The literature has noted the
important relationship between supply chain management strategies and competitive
advantage for a business (Li et al., 2006). This can be explained by taking a resource-based
view of a business; marketing-based assets such as customer relationships, knowledge of the
external environment, and distribution channels, can create customer value and thus lead to
both a competitive advantage and profitability (e.g. Grant, 1991; Srivastava et al., 2001).
Evidence suggests that agricultural producers are increasingly selling directly to consumers.
For example, the value of directly sold products increased by 37 percent between 1997 and
2002 in the US, and the number of farms engaged in direct marketing increased by almost six
percent (Thilmany & Watson, 2004). Farmers markets, roadside stands and pick-your-own
are examples of direct marketing channels. Thilmany and Watson (2004) reported that direct
marketing is more likely to be used by smaller producers and they noted that an adjacent
large urban population assists those producers who utilise direct marketing strategies.
26 | P a g e
Traditional wine channels
Whilst the production and consumption of wine was once quite localised (Hussain et al,
2008), since the early 1990’s most wine sales have occurred through large supermarkets,
hypermarkets and liquor outlets. For example, some 41 percent of wine sales in the US
market in 2000 were made through supermarket channels (Wickham et al., 2001) and
globally supermarkets account for 60 to 80 percent of all wine sales (Gettler, 2003).
Typically, an indirect distribution channel will flow from the winery, through a wholesaler or
distributor, to a retailer or restaurant, and on to the end consumer. Whilst the indirect sale of
wine through large retailers is prevalent in most markets, many wineries also utilise direct
channels as a component of their overall distribution strategy.
Direct marketing of wine
Bruwer (2008) suggested that the direct marketing channels most often used by French wine
producers are cellar door operations, farmers’ markets, wine shows, mailings, the internet,
and producer associations. Other studies have reported that the most successful direct
marketing channels include wine clubs, the internet and winery cellar doors (e.g. Berglund,
2003; Coppla, 2000; Bruwer & Wood, 2005; Mitchell & Hall, 2004). There is evidence to
suggest that direct wine sales are increasing; Heald and Heald (2007) reported that the value
of wine sold directly to US consumers has reached one billion dollars.
The majority of research on the direct marketing of wine has focused on the use of internet
strategies. This is not surprising given that the rapid development of e-commerce has made it
easier for businesses to engage in direct sales with customers. Indeed, Hussain et al., (2008)
suggested that small wineries should exploit technology and explore new avenues to establish
direct contact with wine consumers. It has been reported that wineries, particularly smaller
businesses, can benefit through using internet technologies to sell wine (e.g. Goodman, 2000;
Major, 2000; Mueller & Stricker, 2000). In the Australian industry, taxation benefits are
associated with wine sales through direct channels and thus these distribution strategies are
important for small wineries (Sellitto & Martin, 2002). In an Australian survey, Sellitto
(2004) reported that direct marketing was more important for sales and profitability to
smaller wineries than to those producing larger volumes of wine. Similarly, research in the
French wine industry revealed that direct marketing channels are most often used and more
important to smaller wineries, with the cellar door being the single most important channel
(Bruwer, 2008). Earlier research with New Zealand wineries also revealed that direct
marketing is essential for small wineries (Mitchell & Hall, 2004) and research in Southwest
Michigan reported that smaller wine businesses sell most of their wine directly through their
cellar doors in order to achieve higher profit margins (Wargenau & Che, 2006). There is also
a considerable body of literature (e.g. Bruwer, 2002; Fountain, Fish & Charters, 2008;
Houghton, 2001) that has examined the building of relationships and brand loyalty through
winery cellar doors, wine tourism or wine events; although related, this study has not
specifically focused on this area of the literature.
27 | P a g e
Direct marketing channels and competitive advantage
Literature suggests that businesses can gain advantage through utilisation of direct marketing
channels. Jeuland & Shugan (1983) noted that direct channel strategies reduce a producer’s
dependence on traditional retailers, moderate pricing inefficiencies and may allow sales at a
higher margin. There is evidence that agricultural producers can charge higher prices and
achieve higher margins when marketing directly to consumers (e.g. Hardesty & Leff, 2010;
Kambara & Shelley, 2002; Stephenson & Lev, 2004). Indeed, 63 percent of surveyed
Californian agricultural producers stated direct channels were most profitable (Kambara &
Shelley, 2002). Verhaegen and Van Huylenbroeck (2001) similarly noted that Belgian
farmers achieved higher revenues when using innovative marketing channels (e.g. farmers
markets and co-operatives) than when selling products through traditional retailer channels.
Thilmany and Watson (2004) suggested that agricultural producers who adopted direct
marketing strategies were able to build a loyal customer base and could differentiate their
products on the basis of quality, versus selling low margin commodity products through
traditional retailers. This loyalty may, in part, arise from the ability for direct-purchase
consumers to gain information about the producers themselves and the practices used to
produce the foods they will consume (Hardesty & Leff, 2010). Supply chain management
literature also supports the view that the shorter the supply chain (i.e. closeness of a business
to its customers), the higher the quality of the disseminated information will be (Li et al.,
2006). Hardesty and Leff (2010) also noted that direct marketing is particularly attractive for
small agricultural producers as they can (a) earn higher profits through bypassing supply
chain intermediaries and (b) they are able to sell volumes that would otherwise be too small
for traditional retailers. The authors summarised their research with producers in the US by
stating that “smaller farmers can build financially viable operations using direct marketing
channels to obtain access to markets, growing their farming operations, reduce their
marketing risk, and gain market power by providing consumers products with attributes that
are not readily available in the industrialised produce distribution system” (pp. 17).
The importance of direct marketing channels for small wineries may relate to volume: they
cannot guarantee supply to retailers and thus are more likely to sell through one or multiple
direct channels. In addition, thousands of large international wine brands compete for space
on the shelves of increasingly large and powerful supermarkets; smaller wine businesses are
unable to compete with these brands or negotiate favourably with these retailers. Coppla
(2000) reported that through the use of direct marketing channels, a winery can gain control
of its brand identity and can have flexibility in terms of its pricing strategy. Similarly, Dodd
(1999) reported that direct marketing channels represent the most effective strategy for small
wine producers; they can control the quality of products and associated services, manage
brand image, and develop long-term, mutually beneficial relationships with customers.
Whilst the literature indicates that direct marketing channels are important to smaller wine
businesses, little detailed information is currently available as to how a business might go
about selling their wine through direct marketing channels in order to gain a competitive
28 | P a g e
advantage. This paper addresses this gap and provides insight that is likely to be of practical
use to other small wine businesses.
3. METHOD
A single wine business was selected for this case study because it provides a unique case in
terms of its use of multiple direct marketing channels. The case study method is an effective
technique for investigating a contemporary phenomenon and is particularly suitable for the
in-depth exploration of a single subject (Yin, 2003). A semi-structured interview technique
was used to obtain information from the owner-manager of the business. The interview
focused on identifying the business’s marketing strategy, the reasons for the strategy and any
competitive advantage they have gained. The interview took place in April 2015 and was
carried out in person on the business’s property.
The small, family-owned wine business is situated in close proximity to one of New
Zealand’s cities. The property includes a 12 acre vineyard, a restaurant and an event venue.
The present owners purchased the property in 2002. The business is a boutique wine
business, producing Pinot Noir, Riesling, Chardonnay, Sauvignon Blanc and a sparkling
wine. The winemaking function is outsourced to another local winery, allowing the owners
to focus on their core celebration business and avoiding the need for any investment in
winemaking equipment or staff. The owner-manager talks of the decision to outsource
winemaking and bottling as one that “keeps us front of house and more customer-centric”.
The business is classified as a Category 1 winery by the national industry body, New Zealand
Winegrowers. Category 1 wineries have sales of less than 200,000 litres. These small
wineries dominate the New Zealand wine industry, with 88 percent of the total 692 wineries
being classified as Category 1 producers (www.nzwine.com/info-centre/statistics/).
Accordingly, this business is representative of the industry as a whole.
4. RESULTS AND DISCUSSION
Marketing Strategy:
The business is positioned as a “wine celebration business”, not as a winery. The owners
have adopted a strong market orientation and they have a clear understanding of their
customers’ needs and motivations. The owner-manager stresses that the business isn’t
necessarily focused on selling something on the day a potential customer makes initial
contact, but rather it is “about building the customer experience”. In effect, the business is
working to pull customers to them, rather than pushing products out to customers.
To help develop and maintain customer relationships, they incur a small cost (just $12 per
month) to use a cloud-based Customer Relationship Management (CRM) tool called Capsule.
This CRM software is also linked to their accounting software (i.e. Xero) and their email
management software (i.e. Active Campaign). This makes it seamless for the business to
book an event in Capsule and send an invoice from Xero. Every contact from any potential
customer, received via email, phone or through their website, is logged into the CRM tool.
Capsule and Active Campaign allow them to send personalised and customised offers to
29 | P a g e
various groups of customers. For instance, after winning a wine award recently, the ownermanager sent a message to those customers who had previously purchased wine via the cellar
door, email or the internet and offered these customers advanced access to purchase the
unreleased trophy-winning wine. This case illustrates that a small wine business can exploit
new technologies in order to establish direct contact with customers, as per the suggestion
from Hussain et al. (2008). This business also provides a practical example of the links
between direct marketing and both relationship marketing and database marketing.
The business is able to host a range of events of different sizes and formalities. Weddings are
the primary event focus and the owners have invested in a new pavilion that is an attractive
setting for outdoor weddings. The building of the pavilion has led to the number of weddings
hosted by the business doubling from thirty to sixty per year. From day one, the focus has
been on supplying a product that would sell. An excellent example of this is the development
of a new sparkling wine that is a blend of Riesling and Pinot Noir; this was produced
following a $20,000 investment in research and development. The product was developed
for a target market with a specific need; that of young female customers attending weddings
onsite. Aside from the pavilion, there is also a main building that includes a cellar door area
for wine tastings and sales, as well as a large restaurant area and two smaller function rooms.
Through their positioning as a wine celebration business, the business primarily sells wine to
customers through the restaurant and cellar door, at events such as weddings, conferences or
corporate functions, and when hosting visiting cruise ship passengers. Indeed, about eighty
percent of the total wine sales are made through the events side of the business. The ability
to sell most of their wines through direct channels is undoubtedly related to the property’s
physical proximity to a large urban population; this type of location has been previously
reported as assisting the direct sales of other small agricultural producers (e.g. Thilmany &
Watson, 2004). The business has an annual contract to provide lunches for cruise ship
passengers and these provide a regular and growing business that occurs on otherwise quiet
weekdays. The wines are also promoted and sold at local food and wine shows or events; the
owner-manager believes these are a good showcase for the wines, but they only attend those
from which they are able to make money. Finally, customers are able to purchase wine
directly from the business through the internet or via email.
A very small portion of their total wine sales are made through local specialty stores, such as
florists and cafes (NB. these sales amount to just five percent of total revenue). The business
does not supply any wine to supermarkets, liquor stores or other large retail outlets. It should
also be noted that the business undertakes only a very small amount of advertising; the
owner-manager estimates that advertising expenditure accounts for just two percent of total
revenue.
Together, these outlined strategies have resulted in the business earning ninety-five percent of
their total revenue through direct wine sales to customers. Direct marketing channels are thus
of significant importance to the business; this provides evidence to support previous research
in France, Australia, the US, and New Zealand reporting that direct marketing strategies are
30 | P a g e
most important for smaller wine businesses (e.g. Bruwer, 2008; Goodman, 2000; Mitchell &
Hall, 2004; Sellitto & Martin, 2002; Sellitto, 2004).
Competitive Advantage:
The choice of direct marketing channels, such as restaurant, cellar door, events and online
sales, allow the business to remove intermediaries from their supply chain and thus generate
greater profit margins. The owner-manager notes that the business achieves a higher mark-up
when they sell wine directly to customers. He asks “well, what would you rather have? $39
a bottle being paid today versus trying to sell wholesale at $16.50 and being paid the
following month?” The findings of this case study provide further support for earlier
literature stating that producers can charge higher prices and achieve higher margins when
selling directly to consumers (e.g. Hardesty & Leff, 2010; Kambara & Shelley, 2002;
Sephenson & Lev, 2004; Verhaegen & Van Huylenbroeck, 2001).
Higher margins are not the only financial advantage the business gains from selling directly
to consumers. Through this strategy they also get paid immediately by the customer and thus
are able to optimise their working capital. This allows them to manage their cash flows more
effectively and this is particularly important for small businesses. Indeed, the predominant
reason for business failure amongst SMEs is inadequate cash flow or cash planning.
The direct marketing strategies allow the business to have greater control of pricing and they
gain efficiencies by not having to ‘manage’ intermediaries in a supply chain. Similarly, the
business is not reliant on large supermarkets that typically wield considerable power over
small suppliers. This case study provides support for Moller and Halinen (2000) who
referred to direct marketing as a way of enhancing the efficiency of marketing activities such
as distribution and communications.
Finally, the business also gains control over customer service. As they are focused on
building and maintaining close relationships with their customers, providing quality customer
service is essential. By communicating directly with customers, the business is able to
disseminate high quality information about their wines, production practices, and event
venues directly to consumers. This ability to provide quality information has been previously
identified as having a link to building loyal customers (Hardesty & Leff, 2010). The use of
technology, such as their CRM tool, also provides them with a way to enhance customer
relationships through personalised messages or offers. Indeed, this case study is a good
example of how the value of the business has been increased through investments in CRM
processes that nurture the creation of customer value. A resource-based view of the business
would suggest that they have a number of marketing-based assets, including strong customer
relationships and short distribution channels; the literature notes that these marketing based
assets can create customer value, provide a competitive advantage, and increase profitability
(e.g. Grant 1991; Srivastava et al., 2000).
5. CONCLUSIONS
In line with the comments of Dodd (1999), the profiled business provides an excellent
31 | P a g e
example of a small wine business that has been able to use direct marketing channels to
control the quality of their products and services, to manage their brand image, and to
develop long-term, mutually beneficial relationships with their customers. By focusing on
the ‘wine celebration business’ rather than the ‘wine business’ they have strategically
positioned their enterprise as a customer-focused one; the customer relationships they build
and maintain allow them to sell a majority of their wine through direct marketing channels.
For this business, direct channels are not supplementary to selling through typical indirect
channels via large retailers, but rather the direct selling of wine is the primary distribution
strategy. Other small wine businesses could adopt a similar approach of maximising sales
through direct channels and reducing the reliance on indirect channels in order to gain a
competitive advantage; options for direct channels include selling wine through a cellar door,
the internet, via email, at events or in an onsite restaurant. The use of a CRM tool can assist a
winery to manage customer relationships. Future research could be carried out with a larger
number of New Zealand wineries to quantify the use and importance of direct marketing
channels across the industry and to examine the influence of winery size on selected
distribution strategies.
References:
Baron, S., Davies, B. and Swindley, D. (1991), “Dictionary of Retailing”, Macmillan Press, London.
Berglund, L. (2003), “Is your wine club healthy”, Wine Business Monthly, Vol. 10 No. 6, pp. 34-35.
Bruwer, J. (2002), “The importance and role of the winery cellar door in the Australian wine industry:
Some perspectives”, The Australian & New Zealand Grapegrower & Winemaker, August, pp.
96-99.
Bruwer, J. (2008), “Direct marketing channels in the French wine
Wine Business Research, Vol. 20 No. 1, pp. 38-52.
industry”, International Journal of
Bruwer, J. and Wood, G. (2005), “The Australian online wine-buying consumer: motivational and
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Stimulating innovation in family winegrowing firms:
Knowledge sharing between generations
Paul Woodfield
The University of Auckland Business School, New Zealand
[email protected]
Kenneth Husted
The University of Auckland Business School, New Zealand
[email protected]
Abstract:
Purpose: This paper examines how intergenerational knowledge sharing in family
winegrowing firms impacts their innovation.
Design/methodology/approach: Our study involves 27 interviews already conducted across
three case sites in the wine industry in New Zealand.
Findings: We argue that different levels of hostility towards engaging in knowledge sharing
held by the older generation (OG) and their following, younger generation (YG) impacts the
ability of their family firm to innovate. We present two matrixes where first the source of
knowledge is the OG and the receiver is the YG, and second where the source of knowledge
is the YG and the receiver is the OG. The first model illustrates a likely case of incremental
innovation while the second model is associated with radical innovation.
Practical implications: By having strategies in place to minimize hoarding or rejection of
knowledge, redundancy in the knowledge production and problem-solving processes can be
avoided.
Keywords: Wine industry, family business, innovation, knowledge sharing, traditional industry
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PURPOSE
This paper examines how intergenerational knowledge sharing in family winegrowing firms
impacts their innovation. We argue that different levels of hostility towards engaging in
knowledge sharing (from low to high) held by the older generation (OG) and their following,
younger generation (YG) impacts the ability of their family firm to innovate. The paper
subsequently outlines a range of possible actions to overcome inter-generation knowledge
sharing related tensions and hostility.
ISSUE ADDRESSED
Knowledge management is not widely discussed in family firm literature although some
existing research explores knowledge as an important dynamic capability {Chirico, 2008
#14208}, a strategic resource {Cabrera-Suárez, 2001 #4424}, and a source of competitive
advantage in family firms – particularly where there are strong relationships and
connectedness resulting in information and knowledge sharing and learning {TrevinyoRodriguez, 2006 #14516}. Examination of knowledge sharing in particular has been obscure
in family firm research, and indeed sparse in the wine industry context. This is somewhat
surprising considering family firms tend to strive to maintain knowledge long-term within the
family {Cabrera-Suárez, 2001 #4424}, and in particular the winegrowing industry is an
exemplar of this maintenance of knowledge through its traditions.
This paper investigates how the willingness of the OG and YG to engage in knowledge
sharing impacts on the innovation activities of the firm and to which extent these activities
are influenced by the direction of the knowledge flow – from OG to YG or vice versa.
Tensions between the two can result in hoarding and/or rejecting knowledge where the
preference would be to create conditions that stimulate innovation behaviour efficiently
{Husted, 2012 #17367}. While hoarding and/or rejecting knowledge may have a detrimental
effect in any organization, motivation in a family firm to mitigate knowledge sharing hostility
is typically stronger. The reasons behind this could be various, e.g. to ensure future
ownership, to develop/maintain common vision {Hubler, 2009 #1767} and long-term
orientation {Lumpkin, 2011 #14382}. However, the issue of reliance on a shared
understanding of the content of knowledge between those transmitting and those receiving the
knowledge still remains {Husted, 2002 #14362}. In sum, this study addresses the issue of
knowledge sharing between generations in family firms and its impact on stimulating
innovation.
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RESEARCH STRATEGY AND CONTEXT
Our study involves 27 interviews already conducted across three case sites in the wine
industry in New Zealand. Interviews were carried out with all family members involved in
the respective businesses, and a sample of employees which served as an objective account of
the dynamics in the family. Each case site represents two generations with each generation
having leadership responsibilities within the business. This allows analysis of knowledge
sharing from OG to YG and vice versa. We carried out a thematic analysis utilising NVivo 9
qualitative software. This iterative process allowed us to synthesize data to establish patterns
and themes {Wiles, 2011 #16766}. Table 1 presents some of the demographics of the cases.
Table 1: Case sites
Number of
family
members in
the business
Generations
since
establishment
OG and YG
Three
Three
40
OG
Five
Two
25
OG
Five
Two
Years in
business
(approx.)
Ownership
Merlot Family
Vintners
100
Sauvignon Family
Estates
Riesling Family
Winegrowers
Company
STIMULATING INNOVATION THROUGH KNOWLEDGE SHARING
We consider knowledge sharing between generations as obverse when the OG is the source of
ideas while the YG is the receiver. This is seen as the traditional model for the flow of
knowledge, and likely to result in incremental innovation. Reverse knowledge-sharing occurs
when the YG is the source of ideas while the OG is the receiver. In this situation there is
potential for radical innovation through new experiences and competencies the YG gained
from their education and vocation.
Figures 1 and 2 present two matrixes where the source of knowledge is the OG and the
receiver is the YG (Figure 1) and the other way around in Figure 2. The horizontal and
vertical axes present a continuum from low to high knowledge-sharing hostility. The first
model illustrates a likely case of incremental innovation while the second model is associated
with radical innovation. An important difference between the knowledge sharing scenarios is
that the OG could do what they choose given the power relationship between the generations.
For example, the OG may still implement an innovative idea even if rejected by the YG.
Conversely, if the OG rejects an idea from the YG it may never be implemented. Another key
difference is the potential for radical innovation when the YG is the source of ideas and there
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is synergy with the OG. This is not to say radical innovation does not occur when the OG is
the source, but emphasis is placed on the synergy between the generations rather than an
autocratic approach on the part of the OG.
OG (source)
High
hostility
Low
hostility
Action
Conflict
New solutions
implemented but may
find opposition from the
YG
Unlikely to resolve due to
both generations
hoarding/rejecting
knowledge
Synergy
Frustration
Incremental if innovative
but if not there could be a
tendency to retain the
status quo
Low hostility
YG hoard/reject ideas but
may have no say in what is
implemented
High hostility
YG (Receiver)
Figure 1: Incremental innovation through obverse knowledge sharing
The action quadrant represents ideas that the OG generate and which the YG may oppose but
on the whole go along with the idea. An example would be where the OG suggests
engineering a piece of equipment to undertake a task which could be fulfilled by a proprietary
product. Conflict can occur where the OG does not share knowledge and instead just
implements what he/she wants without consulting the YG. This could be particularly
impactful where the YG is responsible for a task which has been overridden by the OG in
which case the YG may reject an idea and make their strong opposition known. The bottom
right quadrant represents frustration which could occur when, for example, the YG rejects
and idea. A practical example from our study was when the OG of one family decided to
build stainless steel tanks and place them outside the main tank building. The YG were of a
strong view they should be placed inside to maintain the aesthetics of the winery. In this
scenario it was agreed that new tanks were required however their placement was not up for
discussion. Finally the synergy quadrant represents an open sharing of knowledge where
ideas are neither hoarded nor rejected. An example would be where the YG put forward an
idea which is accepted by the OG, encouraging innovation to occur. Ingredients for this
diverse knowledge sharing is good family ties and communication between the generations.
From our study, an example where the OG presented an idea the YG accepted and supported
was hospitality. The OG wanted to open a fine dining restaurant and with the support of the
YG, in particular one daughter who was experienced in hospitality, were able to make this
happen. The daughter in this instance not only shared her experience in hospitality but was
intimately involved with the marketing of the winery which only heightened the synergistic
nature in this scenario.
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YG (source)
High
hostility
Conflict
Inaction
New solutions found but
not shared and/or
implemented
Unlikely to resolve due to
both generations
hoarding/rejecting
knowledge
Synergy
Inertia
Radical if innovative but if
not there could be a
Low
tendency
to retain the
hostility
status quo
Low hostility
OG hoard/reject ideas and
slow down the
implementation process
High hostility
OG (Receiver)
Figure 2: Radical innovation through reverse knowledge sharing
There is a higher likelihood of inaction where the YG hoards ideas and/or has an inability to
act on solutions without permission from the OG. The conflict quadrant is similar to Figure 1
only the source and receiver are reversed, that is there is high hostility from both sides toward
sharing knowledge. The inertia quadrant represents the YG sharing ideas but the OG
rejecting knowledge. As the OG is often the authority within a family business they can
choose not to implement the idea. An example would be where the YG brings knowledge
about a product or process they have learnt through education or experience such as organic
growing, however the OG is unwilling to change the status quo or does not want to break
from tradition. Where radical innovation could occur is when the YG presents solutions from
their more recent education and experience and there is synergy with the OG who accepts the
new ideas and supports the YG in their solution.
An example of the benefits of diverse knowledge sharing was the introduction of organic
grape growing and wine production by a daughter in one family firm. There was some
potential for tension because, like her father, she was a viticulturist. While she had experience
through her degree and working around the world in different wineries, the father based his
practice on experience from a large corporate winery. Given her new experiences, she
proposed the idea of growing grapes organically and producing organics wines. This was
considered high risk given the rigorous industry standards but she managed to convince her
parents to set aside several hectares to experiment with. What eventuated was a successful
award generating sub-brand that satisfied a market the family business had not previously
pursued. The father gave her more leeway to experiment with different varieties while
providing her with more land.
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RELEVANCE TO PRACTITIONERS AND ACADEMIC SCHOLARS
Advantages that a family firm has over corporate firms to facilitate knowledge sharing
include connectedness and cohesion {Björnberg, 2007 #4595}, trust and close ties
{Sundaramurthy, 2008 #2143}, and the ability to build tacit knowledge between generations
{Jaskiewicz, 2013 #17362}. By having strategies in place to minimize hoarding or rejection
of knowledge, redundancy in the knowledge production and problem-solving processes can
be avoided. Moreover, by being cognisant of sharing knowledge in a positive way, families
can benefit from a learning environment that encourages two-way or bidirectional
knowledge-sharing {Woodfield, 2012 #14732}. This article introduced knowledge-sharing as
a modus operandi for family businesses to stimulate and manage innovation. At present there
is a paucity of studies on knowledge-sharing in family firms and it is hoped this study
encourages more empirical research in this potentially rich area of scholarship.
REFERENCES
BJÖRNBERG, Å. & NICHOLSON, N. 2007. The Family Climate Scales—Development of a
New Measure for Use in Family Business Research. Family Business Review, 20,
229-246.
CABRERA-SUÁREZ, M. K., DE SAÁ-PÉREZ, P. & GARCÍA-ALMEIDA, D. 2001. The
succession process from a resource- and knowledge-based view of the family firm.
Family Business Review, 14, 37-48.
CHIRICO, F. & SALVATO, C. A. 2008. Knowledge integration and dynamic organizational
adaptation in family firms. Family Business Review, 21, 169-181.
HUBLER, T. M. 2009. The soul of family business. Family Business Review, 22, 254-258.
HUSTED, K. & MICHAILOVA, S. 2002. Diagnosing and fighting knowledge-sharing
hostility. Organizational Dynamics, 31, 60-73.
HUSTED, K., MICHAILOVA, S., MINBAEVA, D. B. & PEDERSEN, T. 2012. Knowledgesharing hostility and governance mechanisms: an empirical test. Journal of
Knowledge Management, 16, 754-773.
JASKIEWICZ, P., UHLENBRUCK, K., BALKIN, D. B. & REAY, T. 2013. Is Nepotism
Good or Bad? Types of Nepotism and Implications for Knowledge Management.
Family Business Review, 26, 121-139.
LUMPKIN, G. T. & BRIGHAM, K. H. 2011. Long-term orientation and intertemporal
choice in family firms. Entrepreneurship: Theory and Practice, 35, pp. 1149-1169.
SUNDARAMURTHY, C. 2008. Sustaining trust within family businesses. Family Business
Review, 21, 89-102.
TREVINYO-RODRIGUEZ, R. N. & TÀPIES, J. 2006. Effective knowledge transfer in
family firms. In: POUTZIOURIS, P. Z., SMYRNIOS, K. X. & KLEIN, S. B. (eds.)
Handbook of research on family business. Cheltenham, England: Edward Elgar.
WILES, R., CROW, G. & PAIN, H. 2011. Innovation in qualitative research methods: a
narrative review. Qualitative Research, 11, 587– 604.
WOODFIELD, P. J. 2012. Intergenerational Entrepreneurship in Family Business:
Conceptualising ways Entrepreneurial Family Businesses can be Sustained across
Generations. Doctor of Philosophy, The University of Auckland.
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Innovating Traditional Products: “Self-Sacrifice vs. Product Authenticity”
Bora Qesja
University of Adelaide
[email protected]
Roberta Crouch
ESC Dijon Bourgogne
[email protected]
Pascale Quester
University of Adelaide
[email protected]
Abstract:
Purpose: Products are continuously innovated to improve organization efficiency and meet
consumer expectations. Although satisfying consumer expectations in a society where buyers
expect continuous product improvement is imperative to survival in today’s competitive
environment, consumers reject 50-80% of these innovated products. While this could be due
to the perceived lack of authenticity of an innovated product leading to diminished perceived
value, our knowledge about the relationship between authenticity and value creation is
limited. Moreover, there is no conceptual explanation specific to how consumers react when
a traditional product, like wine, is intrinsically modified and how consumers’ characteristics,
as well as culture moderate any trade-off between loss of authenticity and gained functional
benefits. This study addresses the above-mentioned gaps through the development of a
conceptual framework, examining whether the intrinsic innovation of a product will elicit a
stronger influence on perceived authenticity when the product is traditional rather than not
traditional.
Design/methodology/approach: The preliminary exploratory approach, involving seven focus
groups and wine tastings, was conducted in Jakarta, where wine is not a traditional product,
and Adelaide, where wine consumption is part of the culture. The innovation was related to a
substantial lowering of the alcohol level.
Findings: Overall results support the conceptual model, showing that Indonesian participants
are more open to consuming low/no alcohol wine and still consider the product to be wine in
contrast to Australian participants, who reacted more negatively to the product innovation
and did not consider the product to be wine.
Keywords: Wine, Product Innovation, Authenticity, Traditional products
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1. INTRODUCTION
Meeting consumer expectations can be challenging – it is hard for companies to introduce
innovated products and even harder to innovate traditional ones (Katz, 2003). Launching
innovated products comes with high risks and the success rate is usually under 50% (Taylor
and Bearden, 2003) due to feelings of inherent uncertainty experienced by consumers when
purchasing these products. Typically, they avoid risk and/or use supportive information to
reduce uncertainty levels (Martinez et al., 2009). Important factors influencing the success of
a product innovation relate to consumer perceptions of authenticity (Gilmore and Pine, 2007),
better value/quality and a good understanding of customer needs (Kenneth 2013; McNally et
al. 2011); hence the acceptance of a new (or innovated) product is critically connected to
belief in superior product attributes as well as consumer characteristics (frequency of
consumption and product class involvement) (Hauteville, 1994). Whilst consumers may well
expect and welcome product innovation in categories such as computers, software, cars and
numerous other categories, the examination of intrinsic innovation of more traditional
products, like wine, is limited resulting in a substantial gap in our current knowledge. As a
result, important attributes of any innovated products may include: their perceived
‘traditionality’ (how traditional a product is perceived to be), the perceived enhanced value of
the innovation and the level of innovativeness offered by the new product over the original.
Wine is a very traditional product with high symbolic value (Meillon, 2010). The intrinsic
innovation of modifying (reducing) its alcohol levels (by partial or complete
dealcoholization) is gaining support in society as the alcohol level in wines has continued to
increased through the years, leading to an increassed per capita consumption (Chikritzhs et
al., 2010). This has led the World Health Organization (WHO) to launch a global strategy
specifically aimed at lowering alcohol consumption. This global strategy, together with
consumers’ increasing health consciousness (ICAP, 2007), has increased the need to develop
new wines and other forms of alcoholic drinks to enhance consumer choice for lower alcohol
alternatives (Grant, 2010). However, lower/low alocohol wines already exist but have not
been very successful due to people expecting these wines to be less traditional, less complex,
to have poorer taste and to lack natural character (Meillon, 2010; Josselin 2008; Saliba et al.
2013). This is particularly true for red wine, which is perceived to be more complex and is
not expected to withstand the dealcoholization process without losing quality (Meillon,
2010). Moreover, red wine is considered more traditional with a somewhat ‘sacred’ status
(Meillon, 2010). In summary, the process of dealcoholization is perceived by consumers to
prevent the traditional winemaking process from being performed properly, and thus hinders
their acceptance of such poducts. Hence, determining an acceptable level of innovation in
wine products, one that would still allow the product to be deemed ‘authentic’ (in terms of
style, varietal, level of alcohol, color), is gaining importance. The purpose of this preliminary
study, therefore, was to test consumers’ response in two diverse wine markets, one where
wine is a traditionally consumed product and one considered an emerging wine market. Wine
products tested were of varying alcohol levels, varietals and styles. The purpose of the
research was to provide support, or otherwise, for a conceptual framework to be empirically
investigated in a later stage of the overall research project.
2. LITERATURE SUMMARY AND PROPOSED CONCEPTUAL FRAMEWORK
A critical factor to the success of a traditional product is product authenticity, which
represents consumers’ subjective judgment about the products’ authentic value (Grayson and
Martinec, 2004; McNamara, 1997). Authenticity is a characteristic attributed by social
42 | P a g e
agreement to certain entities, based on whether an object is considered genuine or ‘real’
(Trilling, 1972). Modern consumers often characterize authentic products as original,
traditional, genuine, unique, and real (Munoz, et al., 2006). Authenticity can become an issue
when compromised (Peterson, 2005; Benjamin, 1936; Trilling, 1972) and traditional products
potentially evoke feelings similar to those aroused by something regarded as authentic
(Carroll and Wheaton, 2009; Levine, 2005; Sokolov, 1998). Traditional products are also
likely to represent particular challenges to consumer acceptance when innovated as opposed
to ‘modern’ product categories, such as computers or mobile phones, where innovation is
accepted and, indeed, necessary for continued success. Indeed, authenticity has become
increasingly important for consumers, overtaking quality perceptions as the main purchasing
criterion (Gilmore and Pine, 2007), thus carrying with it an almost sacred, cultural type of
interpretation that conveys high value (Frazier, Gelman, Wilson, & Hood, 2009). However,
consumers’ judgment about the authentic value of a product and its consumption is subjective
(McNamara, 1997) and the criteria used by consumers to satisfy their authenticity needs
through consumption, may be different from the ones that do not share the same needs (Lewis
and Bridger, 2000). Furthermore, since many products are currently consumed not only in
one country, but also globally, the need for authenticity may vary across cultures. For
example, what is considered to be a traditional product in one culture might not be in another,
and society's culture affects the values and thus the behavior of its members (Hofstede,
2010). As a result, it is important to examine how consumers’ perception of authenticity
differs when the innovated product is traditional to their culture in comparison to when it is
not. Therefore, in this study, two locations were selected for data collection, first Indonesia
(Jakarka), where wine is not a traditional product, and Australia (Adelaide), where wine has a
long tradition of both production and consumption.
It is particularly important to manage and conform to consumers’ perceptions of the
authenticity of a product (Grayson and Martinec, 2004) even whilst innovating it. Yet,
research offering evidence that subjective interpretations of authenticity create value, and
thus lead to purchase intentions, is limited (Kovács, 2014). At its core, product value is an
assessment of what is received versus what is given up to get it (Gupta and Zeithaml, 2006),
and it can be referred to as ‘perceived sacrifice’. When it comes to goods and services
deemed traditional, objects perceived as authentic are considered more valuable than other
non-authentic objects with the same characteristics {Kovács, 2014 #50}. However, when the
characteristics of a product change due to innovation, the research is silent as to whether
consumers’ need for authenticity can outweigh functional benefits they would enjoy as a
result of the innovation. Even though consumption preferences and the behavior of those who
seek authentic value have been explored previously (Crosby and Johnson, 2003; Lewis and
Bridger, 2000), little is known about how consumer need for authenticity plays out in the case
of an innovated product or service (Liao, 2009). Furthermore, research is needed to identify
how perceptions of authenticity differ as a result of consumer characteristics such as product
involvement, frequency of consumption/purchase and socio-economic background, which
represent potentially moderating factors not yet investigated in this context. Products
perceived as authentic are considered more valuable than other non-authentic objects with the
same characteristics (Kovacs and Carrol, 2014). Hence, when a product is intrinsically
modified (such as when lowering the alcohol level in wine), the innovation may erode its
perceived authenticity. Our current understanding of how consumers experience and respond
when the characteristics of a product change substantially due to innovation is very limited.
Wine represents a suitable context for this inquiry given the mainstreaming of wine
consumption in the past two decades that have seen traditional producers, connoisseurs and
critics complain about the lack of authenticity of mass produced wines (Beverland, 2005).
43 | P a g e
Given the continuous need for constant product innovation and improvement in the wine
industry globally, and the substantial number of gaps in our knowledge about innovating
traditional products, a conceptual framework was derived from the extant literature (Figure 1)
which proposes relationships between the constructs discussed. Moreover, the framework
examines the extent to which the innovation of a traditional product influences perceived
authenticity, and how the latter influences value generation for innovated products.
Figure 1. Proposed Conceptual Framework
Willingness to
Recommend
Perceived Functional
Benefits
Innovated Product
Characteristics:
Perceived Traditional
Value
Wine Case: % Alcohol,
Type of Wine/Color,
Varietal/Style
Perceived
Sacrifice
Purchase
Intention
Volume Purchased
Perceived Authenticity of
Innovated Product
Situation; Culture
Consumer Characteristics:
Involvement
Frequency of
Consumption
Socio economic
background
Lastly, the framework illustrates the potential trade-off (perceived sacrifice) between a desire
for authenticity (what is given), and the perceived functional benefits of the innovated
product (what is received). In the preliminary exploratory qualitative phase reported here, we
focused only on how traditional participants perceive wine in their culture (Meillon, 2010)
and how lower alcohol levels in wine influenced its perceived authenticity. This study
focused not only on perceived product attributes (perceived traditionality), but also consumer
perceptions and factors influencing consumers’ value judgement about an innovated product,
controlling for the potential moderators: consumer characteristics, situation and culture.
It is expected that when the characteristics of a product change as a result of an innovation,
the perceived functional benefits change as well. Furthermore, it is expected that with the
realization of any increase in perceived functional benefits, perceived sacrifice will decrease.
Because consumers buy things not only for what they can do, but also what they mean (Levy,
1959) and gain symbolic and experiential benefits from products (Belk, 1988; Keller, 1993;
Mick, 1986; Solomon, 1983), the question of whether perceived diminished authenticity
erodes the symbolic value from the product arises. For example, when mass production
techniques are used to produce furniture, a demand emphasizing craft like hand-made
furniture emerges (Orvell, 1989). Hence, we propose that a diminished perceived authenticity
will lead to higher levels of perceived self-sacrifice. Consumers rely on different cues to
assess authenticity, and attributions of authenticity may vary among consumers, creating
variations in value ratings. The moderating effect of consumer characteristics such as:
44 | P a g e
product involvement, frequency of consumption/purchase and socio economic background, is
therefore expected to have an impact on authenticity.
Involvement or attachment to a product should have a positive effect on the need for
authenticity (Liao, 2009; Glen and Carroll, 2009). We propose that involvement will be
negatively related to the perceived authenticity of an innovated product, such that when a
consumer is highly involved in the product category, the innovation will be perceived to be as
less authentic. It is also expected that consumers with different socioeconomic backgrounds
and lifestyles hold different degrees of need for authenticity based on limited evidence
offered by Liao (2009). Furthermore, as already mentioned, it is expected that the need for
authenticity is a phenomenon that varies across cultures. We propose that when a product is
not traditional in a certain culture (thus leading to consumers not perceiving the product as
traditional), consumers will be more open to the innovation and the perceived authenticity
will be less impacted.
In summary, Figure 1 demonstrates the possible effect of a substantial innovation of a
product with a strong traditional and historical heritage, on perceived authenticity and
functional benefits. Moreover, it depicts potential relationship between the innovated
products’ perceived functional benefits, authenticity and perceived self-sacrifice with flow on
effects to purchase intention, willingness to recommend and volume purchased. The
relationship is moderated, although not yet known to what degree, by product charateristics
(perceived traditionality etc.), consumer characteristics (culture, involvemnt, frequency of
purchase etc.), and external attributes (situation).
2. METHODOLOGY
2.1 Focus groups in Indonesia and Australia
Exploratory research in a form of focus group interviews was employed to explore consumer
reactions to a variety of alcohol-reduced wines in depth (Morgan, 1998). This technique
allows probing for participants’ perceptions (Albrecht, 1993), providing an amicable
environment and has been successfully used in previous studies about wine and authenticity
(Beverland, 2005)
Convenience sampling was employed to examine the relationship between the perception of
product traditionality and authenticity. All participants were recruited through a marketing
company in Jakarta (Indonesia) and a university network in Australia. These countries were
chosen as they exhibit different levels of historical involvement with, and consumption of,
wine and thus it is expected that wine will not be considered equally ‘traditional’ in both
locations. Four focus groups were conducted in Jakarta with the respondents stratified into
18-35 year old males (6 males), 18-35 year old females (7 females), above 35 year old males
(8 males) and above 35 year old females (6 females). The focus groups were replicated in
Adelaide and the respondents were stratified into 18-35 year old males (4 males), 18-35 year
old females (7 females), above 35 year old males (4 males) and above 35 year old females (4
females). The focus groups were conducted March 2013 (Jakarta) and July 2013 (Adelaide).
2.2 Interview protocol and data analysis
A semi-structured interview guide was developed based on the gaps in the literature with a
view to encourage discussion, provide flexibility, and insure consistency across several focus
45 | P a g e
groups (Stewart and Shamdasani, 1990). Key questions were directed to period of drinking
wine (‘How long have you been drinking wine?’), situation (‘When do you like consuming
wine?’), criteria of wine selection (‘What do you look for when buying a bottle of wine?’),
frequency of drinking, perception of low alcohol wines, benefits perceived from consuming
low/no alcohol wines, authenticity of wine, whether they viewed wine as a traditional product
etc. Participants were given eight different wines to taste. The wines varied in attributes and
alcohol level (three reds: 0.5 %, 7.5%, 15.5% alcohol level respectively; two rose: 0% and
13.5 %; three white wines: 0.5%, 5.5% and 13.5 %). No information was given about the
wines and the labels were covered. After the tasting, participants were told that three wines
had no alcohol and were asked whether their perception of those wines changed after finding
out the alcohol level and whether they still considered the beverages to be wine. Participants
were also asked to rate the wine overall from 0 (really disliked it) to 10 (liked it very much).
Moreover, they were asked to guess the alcohol level and to give any comments on the wine.
Identical methodology was repeated in Adelaide.
3. RESULTS
3.1 Results of focus groups in Jakarta
As expected, the no alcohol wines were considered to have the lowest quality overall,
irrespective of varietal and style. However, the small range (4.44-6.55) is a positive sign that
the difference in preference is not as vast. The participants had trouble associating the
character of the wine with the alcohol level, and overestimated the level of alcohol in the
wine. The no alcohol red wine was ranked last, following the prediction made from the
literature review that ‘red wine does not handle the dealcoholisation process the same way as
rose and white wines’. The rose wine was met with the most positive reaction, being
characterized as ‘refreshing’ and ‘easy to drink’. Men above and below 35 were the most
against the dealcoholized wines, however the history of drinking and frequency (years of
drinking wine) played a moderating role. Men that had not been drinking wine for long were
more open to accepting lower alcohol wines. The same acceptance of these wines was
indicated by females below and above 35 years old. However, overall, they were more open
to the idea of consuming these wines on occasion, when wanting to relax after a long day of
work, when not eating and when not wanting to get drunk. The majority still considered the
no alcohol products to be ‘wine’ and their perceptions did not change after finding out the
information. As predicted, wine was not considered a traditional product by most
participants. These participants reacted more positively to the innovation and saw the benefits
as overcoming the downfalls in particular situations. The innovated product was still
perceived as authentic.
On the other hand, the participants that were raised with the culture of drinking wine reacted
more negatively to the innovation, seeing the new product as not authentic, and the perceived
sacrifice as high.
3.2 Results of focus groups in Adelaide
Wine was considered a traditional product and perceived to be authentic at standard or more
‘normal’ alcohol levels. Authenticity was associated more with methods of production,
location, and producer. Similarly to the data collected in Jakarta, the no alcohol wines were
ranked lowest in preference; however there was a discrepancy between the rating of the white
and rose wines and the red. The white and rose wines were considered light and refreshing,
while the red was deemed to be ‘undrinkable’ and ‘like fruit juice’. In constrast to the data
46 | P a g e
collected in Jakarta, respondents reacted more negatively upon finding out that the wines
contained no alcohol with one participant stating that ‘now that I found out that it contained
no alcohol, I would never buy it’ regardles whether they had liked the taste. Judgement of the
wine was also related to a quality benchmark created through years of drinking wine,
particularly when they started as young adults, linking their judgement to the tradition of
drinking wine with their parents. Upon finding out the alcohol content, the majority did not
see the product as authentic and did not agree with the idea of calling it wine. As predicted,
wine was considered a traditional product by most participants. These participants reacted
more negatively to the innovation and saw the downfalls as overcoming the benefits.
On the other hand, the participants that were not raised with the culture of drinking wine
reacted more positively to the innovation, and the perceived sacrifice was lower.
Frequency of drinking, situation and history of drinking were found to play a moderating role
similar to the results in Jakarta.
3. CONCLUSION
The study offers important managerial implications as it explicates how consumers react to
innovations of traditional products, as well as theoretical contributions about authenticity in
the context of product innovations. Moreover, it will also be a contribution to the alcohol
industry by providing an insight as to how consumers perceive the innovation as well as what
is the ‘optimum’ innovated product in terms of style, varietal and alcohol level. This may
provide the foundation for lowering alcohol consumption per capital. The results also provide
strong support for the empirical testing of Figure 1. in the next stage of this research.
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It’s a family business: Investigating organisation and values of
family-owned wineries in Australia, Germany and Italy
Christopher Karl Köhr
Montpellier SupAgro, France
[email protected]
Armando Maria Corsi
Ehrenberg-Bass Institute for Marketing Science, Australia
[email protected]
Roberta Capitello
University of Verona, Italy
[email protected]
Gergely Szolnoki
Hochschule Geisenheim University, Germany,
[email protected]
Abstract:
Purpose - Family businesses play a crucial role in the world wine sector. Little research has
been conducted previously to investigate how organisational characteristics of wineries are
influenced through family owner- and leadership of the business. This study aims to advance
knowledge in this field by exploring family wineries in different wine-producing countries.
Design/methodology/approach - Qualitative semi-structured interviews have been conducted
with 53 family-owned wineries in Australia, Germany and Italy. The sample shaped up by
companies of different age and size. Data have been transcribed and aggregated to identify
patterns within the sample.
Findings - The governance of family-owned wineries has shown great diversity among the
sample. Size, country, age of the business, as well as expertise of the top management team
have been identified to be key influencing variables. Implementation of governance structures
has shown to become indispensable in family businesses as the company grows. Australian
businesses have been found to formally address this issue. Ensuring that family values are
carried through any level of the business supports governance from a social point of view.
Practical implications - In an increasingly fast-paced business environment in the agricultural
sector, implementation of governance structures can become a strategic resource and support
longevity of the family businesses.
Keywords: Family business, wine, management and governance, resource-based view,
familiness
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1. INTRODUCTION
Global markets have become more fast-paced and subject to a growing price pressure. In
order to keep pace with these challenges, family-owned wineries, which are estimated to
account for approximately 70 percent of all wine businesses (Woodfield, 2014), need to learn
how to capitalise on their resources in an efficient way. Family involvement in companies
can, in fact, create a unique firm-specific resource (Micelotta and Raynard, 2011), which
enables firms to generate a competitive advantage over non family-owned wineries (Craig et
al., 2008).
Given the high impact of family businesses in the wine sector, a better understanding of
organisational characteristics and values of this type of business can help to overcome
challenges these businesses face. This research intends to advance knowledge in this field by
investigating the management of human resources within family-owned wineries, their values
and family ties and the measures taken to ensure generational succession. These aspects are
explored by comparing distinctive businesses across three different wine-producing countries,
Australia, Germany and Italy. This study is the first exploratory outcome of a broader
research aimed at understanding the family firm identity in the wine industry.
2.1. Human resource management
The management of human resources is critical for family-owned wineries (Reid et al., 2002).
It is argued that the way a firm assigns roles to its employees differs among companies.
Family firms may fall short in attracting and maintaining talent, due to negative
preconceptions, such as limited career opportunities or nepotism. In family firms, in fact, the
standing of an individual may rather be determined by what an individual „is” rather than by
what an individual „does” (Lansberg, 1983).
Sharma et al. (1997) outline that looking into the management of family firms will help
understanding how the influence of the family can be directed towards more productive and
profitable outcomes in the business.
Structures that unite the management and ownership of firms may help to reduce agency
costs. It is expected that through family ties in family firms, higher levels of loyalty and
mutual trust increase horizons of managers (James, 1999). Nonetheless, this advantage also
comes with additional risks when missing hierarchies cannot put governance structures in
place. This effect may lead to a situation which encourages the retention of incompetent
family staff while competent employees may leave the firm (De Massis et al., 2008). Schulze
et al. (2001) found that unity of management of ownership in family businesses cannot
eliminate the occurrence of agency costs and state that altruism and self-control are its major
origins. It is essential that the firm for this reason implements internal control mechanisms in
order to avoid risks that may endanger the performance of the firm (Gomez-Mejia et al.,
2001). Dyer (1988, 2006) argues as well that professionalisation of the family firm is one
means to avoid adverse selection in the company.
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2.2. Values and family ties
Family ties emerge from relationships between family members and influence interaction
characteristics inside the business system. Although family businesses have been reported to
be oriented on the long run through values and family ties, monitoring mechanisms are
required to reduce agency cost in a family-contracting situation (Gomez-Mejia et al., 2001).
Family ties are found not only relevant inside the family as a whole, but especially within the
group of family members managing the business, namely the business family. Particularly,
non-family employees may become an extended part of the family through interaction with
family members (Uhlaner, 2006).
A recent analysis by Fletcher et al. (2012) holds further that culture and values in the family
business are an important integrating mechanism of the family and the business (management
and ownership) system. Business families can be considered as specific types of teams
(Uhlaner, 2006). Members share similar values and norms, and are able to resolve conflicts
effectively among each other (Poutziouris et al., 2006). Less hierarchical organisational
practices support this ability. Further, short-term sacrifices may be taken willingly during
periods of economic downturn and members may be more willing to pursue non-financial
goals (Zellweger et al., 2013). On the other hand, this fact implies that relationships of this
kind may also run the risk of more conflicts due to an exchange of thought and opinion which
are not only related to the firm. According to Maguire et al. (2013), familiness, as the
outcome of interactions between family values and business activity, involves indexical and
iconic cues in family wineries, generating credibility and authenticity; it is a point of
attachment for employees and consumers.
2.3. Succession
Succession planning in family firms is a critical aspect to ensure longevity of the firm and
ensure successful operation across generations. The transition of management in a firm is a
very sensitive stage of the business. Transitions ideally happen gradually, but this still
depends on the knowledge and ideas brought forward by the new generation. The succeeding
generation can have, in fact, a very different approach about the way the business needs to be
run and managed both in the short and long term. For this reason, succession will alter the
perception of familiness within and outside the firm (Habbershon and Williams, 1999).
However, family firms seem to struggle to cope with succession, as they lack clear
mechanisms and guidelines to handle the succession process (Ibrahim et al., 2001). One
important aspect from a market oriented point of view is the management of the identity of
the family firm during the succession process. The internalisation and reflection of the current
identity helps to assess, manage and preserve a firm’s unique familiness, which is considered
a crucial part that has to be approached during the process of succession. It is argued that
organisational knowledge is the key to success in any business (Cabrera-Suárez et al., 2001).
Looking at family businesses, relationships in the firm help to enable transfer of knowledge
during a succession more effectively compared to a non-family company (Bjuggren and
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Sund, 2002). Relationships between successor and predecessor are not limited to work and
enable exchange beyond aspects related to the business. Also knowing the family business
from early childhood on and dealing with the business also as a part of the family life may
give a head start when entering the business (de Vries, 1994; Boyd and Royer, 2012).
3. METHOD AND SAMPLE
Semi-structured interviews with 53 Australian, German and Italian family-owned wineries
have been conducted between February and June 2015. These interviews have been
conducted with family members or non-family staff in managerial roles and lasted 30 to 60
minutes. Interviews have been recorded and transcribed afterwards. The deduction of results
follows a common approach for case study research by Eisenhardt (1989).
Wineries have been selected to fall into three distinctive size groups according to their annual
production: small (less than 100,000 bottles per year), medium (100,000 – 1,000,000 bottles),
and large (more than 1,000,000 bottles)
The questions have been synthesised based on the literature review. The questionnaire
resulted in a set of nineteen questions.
This article represents a first exploratory analysis of collected information focussing on
surveyed business issues concerning organisation and values. They have been grouped in four
categories for analysis purposes based on the areas of the literature presented above. Due to
space limitations, it is not possible to report all the considerations that emerged from the
interviews.
4. RESULTS
4.1. Structural organisation
Respondents generally agreed that among smaller businesses it is necessary to show high
flexibility with respect to structural organisation. The lack of formalisation in smaller
businesses appears to go hand-in-hand with high workloads across a wide set of tasks, which
makes business owners struggle to make regular meetings happen. Some of the respondents
in smaller businesses reported that organisational structures have not been formally defined:
“this is an area where we are letting ourselves down” (Australian small winery). Although
governance structures are not very clear among smaller firms, some divisional separation can
be observed. This is particularly true for companies where family members take
responsibility for business units such as viticulture, oenology and sales. In these cases,
especially for small Italian wineries, females and younger members seem to be more prone to
develop new marketing activities (e.g. social media communication) or business areas (e.g.
hospitality). Among medium-sized businesses, the choice of organisational structures
becomes more diverse compared to the previous group. Due to increasing work in the
company, not all roles can be occupied by family members. However, among Italian
wineries, it is commonly found that the family business is run by siblings, most commonly
brothers. This happens in some German and Australian wineries; however, businesses
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leadership appears to be in the hands of one key figurehead. Keeping the control in the family
seems to be a major concern of the families.
Among large businesses and with the implementation of formal management structures, it is
found that non-family employees also acquire managerial roles in the top level of the
business or in the management of wine estates located in different wine regions with broad
powers of responsibility (especially for Italian large wineries). This often leads to the
formation of “formalised structures” (Australian large winery), where the presence of a
constructive board is fundamental for the management of the business. Accountability
appears to become an increasing concern of the firms. In addition, “very strong family
governance systems” are able to “deal with the family issues that arise from time to time”
(Australian large winery).
4.2. Human resource management
4.2.1. Governance
Small family businesses do not show very clear governance structures with respect to their
human resource practices. If additional staff is required to work for the winery, additional
family members may be recruited in the first place. This practice can also be observed in
small and medium-sized wineries. In big wineries, a dedicated role in human resource
management is usually present in the business that manages staff and organises the
recruitment of new members. The recruitment follows specified processes in order to achieve
the accountability mentioned in 4.1: “We are very much making sure that we have a level of
accountability and level of performance review in the organisation and it doesn't matter what
your surname is” (Australian large winery).
4.2.2. Family leadership
In small and medium-sized wineries, family members find themselves in charge of leadership
roles in different business sectors, such as viticulture, oenology and administration. Although
this pattern is very consistently found among this type of businesses, at the same time the
need to show flexibility across different sectors is underlined. Large wineries also show
characteristics of family leadership. Among Australian large family wineries, much
formalised structures can be found more commonly. In European firms more informal control
mechanisms appear to be in place. Some Italian small wineries highlight mutual trust and
involvement of non-family employees as important values for the family leadership.
4.2.3. Customer interaction
Small and medium-sized businesses families are responsible for the vast majority of the
operative day-to-day business activities. While Australian wineries tend to have dedicated
staff, such as a non-family cellar door manager, European wineries have been found to be
more reluctant: “Family members are at the sales front, […] my father also does the sales
and he is the original personality of the business” (German medium winery). However, a
need to shift towards dedicated staff has been voiced. No matter whether family or non-
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family staff has been in charge of the role, personal contact was particularly highlighted by
the businesses.
4.3. Transfer of values
Small businesses family members are actively involved in the individual areas of the business
and interact directly with non-family employees - if present in the business - on a daily basis.
In addition, a long-term relationship with employees, even with seasonal employees, has been
reported to be an important component that drives the diffusion of values through all layers of
the organisation. For instance, an Italian winery reports ongoing relationships with their
employees for more than 35 years, another Australian chief executive states to “have been to
primary school together [...][and to] have been good friends for a very long time” with
individual employees. Knowing each other very well for a long time has also been reported to
facilitate processes in the business. In large businesses, more formal governance structures
are in place to ensure that family values guide the actions a business takes. Some companies
consider their values to be crucial for their success and consider it a central part of their brand
identity: “In this aspect we have spent a lot of thoughts on our brand and on what we
communicate. We have elaborated a brand book, which makes clear which characteristics we
stand for. When we are talking about our brand we are talking about our family values. We
feel very strong about being clear what values we communicate with respect to tradition in
the family and also with respect to the sustainability of the business”(German medium
winery). It has to be stated that not all businesses are putting effort in communicating family
values. Some businesses have attributed attention to this aspect or rely on the day-to-day
involvement of the family (“Day-to-day collaboration facilitates the sharing of values”,
Italian small winery), while other companies put substantial efforts in communicating and
promoting the dissemination of values in the business.
4.4. Succession
The process of succession shows a strong emotional component, particularly for small
businesses. It can be clearly seen that not only the business, but also the family system is
involved during this process: “I suppose in the back of our mind, we are doing this for them”
(Australian small winery). Although children may not be forced to be involved in the
business also, the succeeding generation feels a certain pressure: “One does not want to be
the one who breaks up with what others have built up before” (German large winery).
Reported experience of successions has been positive if the members of the older and
younger generation can align their goals. It is reported that the pursuit to innovate the
business is found in disharmony with the traditional views of the older generation. However,
the lack of experience of members of the young generation also underlines the need of
support of the incumbent. If the generations recognise the chances a succession offers and
work hand in hand, a big transformation of the business can occur and the company can grow
and diversify its activities. As the family grows bigger and enlarges across the generations,
ties to the business weaken. Further, succession in agricultural environments is argued to
have happened differently in the past than nowadays with respect to ownership structures. It
is argued that there have been fewer options for members of the young generation in the past,
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while nowadays big corporations are stated to be attractive alternatives. The process of
succession is strongly influenced by the size of the company and by how the operation is
structured (e.g. trust structures). Especially with increasing formal knowledge in the
management of businesses, it was emphasised that family members may have the right skill
set to enter the family business. Among the Australian businesses it was more commonly
found that the top management of a business also tends to be more open to non-family
members during the succession process to drive the development of the business by its entire
potential.
4.5. Future challenges
While many businesses state not to face major organisational changes in the future, a subset
of companies states challenges in different areas of the business. From an organisational point
of view, structural issues, particularly due to succession in the business, are stated to be key.
While succession-related issues have been covered in section 4.4, human resources and
managing change are two major fields that will challenge family businesses in the future.
Businesses in a growth stage – particularly small businesses – are stating that from an
organisational point of view staffing is a central aspect of their future challenges.
Organisational restructuring related to professionalisation are found to be a central point of
medium-sized businesses in Australia: “legal arrangement of the business, and an
establishment of a constitution, which we will govern and which will provide the rules how
decisions will be made”.
Respondents argue, “structural change in agriculture has happened so fast during the last
years” (German medium winery). In order to address this change, family businesses rely on
younger family members that enter the business. This pattern is constantly reported by
businesses which are in the phase of succession: “The organisation will change in the future
thanks to the introduction of the new family management” (Italian medium winery).
5. DISCUSSION
It has been consistently found that several factors influence organisational structures of
family-owned wineries. These are size, age of the business, managerial expertise among the
management, as well as the country the business operates in.
Organisational pattern have been observed to be related to a set of variables. The size of a
family business is found one of the most important factors that influences structures within
the organisation. However, organisational structures have not only been influenced by this
variable. The educational background of managers determines the mechanisms and
governance structures in the family business. Small businesses show difficulties in
implementing formal structures. This may on the one hand enable quick growth, which is also
supported by the reported high level of flexibility in the business, but this initial advantage
may turn into a liability, as the business grows more mature. Organisational structures show
differences among the countries. Major differences can be found when considering the
investigated countries from a binary perspective and classify them as the European and
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Australian perspective. Businesses in the two continents find themselves embedded in a
different surrounding legal framework. The business-orientation among Australian
companies was more openly voiced: “we run our business as a company” (Australian
medium winery). This is in line with the finding of a generally higher degree of formalisation
of processes in the firm.
The organisation of the management in small and medium sized businesses has shown to
belong exclusively to family members. This is partly due to the size of the business, which
does not require extra workforce for this type of activity. However, adverse selection and
retention of unsuitable members (nepotism) in the business can rebound on the organisation.
Smaller as well as younger businesses show that values are rather transferred by implication,
such as through working along with family members. This practice might not be effective as
such to ensure the transfer of family values in the business. This finding has to be highlighted
especially as respondents consider their “family story [...] a potent competitive advantage”
(Australian medium winery). Especially as the family business grows, ensuring that family
values are carried through any level of the business can support governance from a social
point of view.
The succession process in small and medium businesses has shown a high degree of
emotional involvement. Family ties have been reported to help the succeeding generation to
settle in their role and help to overcome inexperience of young members. Planning the
succession in a structured way was only reported by few small and medium businesses.
However, older small family businesses or businesses where the family members had
managerial experience from outside the business, showed that succession planning can also
be found among smaller businesses.
5. CONCLUSIONS
This research investigated the role of structural organisation in family firms in the world wine
sector. From an organisational viewpoint, implementation of governance structures has
shown to become indispensable in family businesses as the company grows. It cannot be
encouraged that firms rely on informal governance of the business through family ties. In
fact, family ties are an important element in the early stage of the business but their effect is
found to change over time. As succeeding generations enter the business, formal governance
mechanisms can support longevity of the family firm. Primarily Australian businesses have
been found to formally address this issue. Managerial expertise did show a positive influence
in finding stable organisational structures. If this organisational knowledge is not present in
the company, external advice can support this process. Major transformations of the
agricultural sector will underscore the need for solid structural organisation of family-owned
wineries to ensure longevity of the businesses.
57 | P a g e
5.1. Limitations
As in deductive research, the propositions we state fit well with the evidence, but did not
perfectly explain the cases on an individual basis (Eisenhardt and Bourgeois, 1988). Another
limitation can be seen in the fact that only a limited amount of time was spent with the
businesses and only reported behaviour could be considered.
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59 | P a g e
Implementing organic viticulture as a business strategy: A case study
Maximilian Iselborn
University of Gießen, Germany
Szent István University, Hungary
[email protected] e
Gergely Szolnoki
[email protected]
Zoltán Szabó
Szent István University, Hungary
[email protected]
Purpose - The study aimed to observe organic viticulture as a business strategy from an
entrepreneurial perspective. Research analysed both quantitative and qualitative data.
Design/methodology/approach - A comparative case study approach was used with respect to
HAK AND DUL (2009). Enterprises were observed by using annual financial statements over a
five-year period. Statistical analysis was conducted to compare key figures that examine
impacts of organic farming compared to conventional farming practices. Moreover, content
analysis was drawn to examine impacts of organic viticulture from an entrepreneur’s point of
view. Results from quantitative and qualitative data was combined to test propositions that
were derived from literature.
Findings - The study reveals that small-sized wineries have to take several strategic actions
due to successful organic farming. Observed data showed several impacts that were linked to
organic farming. A strong information asymmetry is given between producer and consumer
that might lead to less additional value added for producer. Furthermore, organic farming is
more or less self-realization rather than part of an elaborated business strategy.
Practical implications - Organic producer should implement strong communication activities
to increase the awareness of production processes from a consumer point of view as well as
willingness to pay to compensate increasing costs and to raise value added.
Keywords: Organic viticulture, entrepreneurship, business management, strategy
___________________________________________________________________________
60 | P a g e
1. Introduction
Within the last decade several studies have forced examining the overall green trend in
industrialised countries. Consumers become more and more conscious, since information
about green production has increased. While green utility for meat and crops are relatively
easy to catch for consumers and thus bear value added for producers, wine is still a complex
semi luxury good with high search and information costs. Yet, little research has been done to
examine the impacts of organic farming from a producer point of view in the wine business.
Thus, it is unclear whether producer do benefit by implementing organic strategies or whether
they pay the bill of an ongoing transition that is driven by policy makers, traders and
confused consumers. We try to fill this research gap by examining what has to be done for
successful implementation of organic farming as part of a differentiation strategy within wine
entrepreneurship. With respect to SZOLNOKI (2013), who found that the terms organic,
biodynamic and sustainability are often mixed up, we review literature that is linked to
organic, biodynamic, environmental and sustainable issues in the wine industry.
BRUGAROLAS MOLLÁ-BAUZÁ ET AL. (2005) investigated the price premium for organic wines
with respect to conventional wines by surveying 400 Spanish wine consumer. Environmental
and health-conscious consumers were willing to pay a price premium. STOLZ AND SCHMID
(2008) conducted a qualitative study in Italy, France, Germany, and Switzerland to
investigate consumer’s attitude and expectations concerning organic wine. 158 consumers
were analysed through 16 focus groups. Consumers saw organic wines as more healthy, but
lack of quality, since consumers did not understand organic production processes. REMAUD
ET AL. (2008) displayed that organic wine is less valued through 756 Australian wine
consumers. Nevertheless, a few consumers that could be drawn from segmentation were
willing to pay a price permium of $4.99 for wines greater $12.50. MUELLER AND REMAUD
(2010) replicated the study of REMAUD ET AL. (2008) to consider robustness of Australian
consumer preferences towards organic and environmentally friendly claims over time. Output
indicates that valuating organic claims had slidely increased over time from 0.2% to 2%.
Moreover, environmentally conscious consumers paid a price premium for the claim
‘environmentally responsible’. BAZOCHE ET AL. (2008) undertook an experimental auction
with 193 participants in Paris to examine willingness to pay for environmental characteristics.
Though the sample was divided into two groups and information was shared unequally
through both groups, willingness to pay remained similar. Consumers did not value
environmental effects through environmental triggers. BARBER ET AL. (2009) revealed that
consumers with strong attitudes towards environmental issues are more willing to purchase
environmentally friendly wine. FORBES ET AL. (2009) measured consumer attitudes and
willingness to pay regarding environmental sustainable produced wines during the wine
shopping process of 109 retail shoppers in New Zealand. Buyers stated preferences for
environmentally friendly labelled wines. 80% of the sample were willing to pay a markup for
organic farming, since interviewees thought organic wines were more expensive.
Furthermore, 50.3% stated organic farming rises quality. ZUCCA ET AL (2009) observed 300
US wine consumers regarding sustainable viticulture, winemaking and willingness to pay for
sustainable practices. 52% were familiar with the term sustainability, 10% knew sustainable
processors, 90% thought sustainable farming was important for viticulture and would buy
such products. However, 7% had deeper knowledge about sustainable farming practices.
SIRIEIX AND REMAUD (2010) used a perceptual mapping approach to link given attributes to
61 | P a g e
conventional, biodynamic, organic and preservative-free wines. Outcomes reveal that organic
and biodynamic wines are associated with several attributes, but respondents partly delivered
confusing results through the term biodynamic. MANN ET AL. (2011) examined 404 Swiss
wine consumers through bio as a wine attribute with respect to other wine attributes.
Conventional produced wines were preferred compared to organic wines. Social image and
health issues contributed most to organic wine consumption. However, region of origin and
price were mainly attributed. OLSEN ET AL. (2011) analysed the relationships between
environmental and hedonic values in organic wine purchasing process by an online survey
with 321 US wine drinkers. US wine drinker showed that environmental protection and
hedonistic lifestyle contributed to organic wine purchasing decision. Thus, environmental
valuing consumers were willing to self-sacrifice and to pay a markup for organic wines.
SCHMIT ET AL. (2013) conducted an experimental auction with 196 US wine consumers.
Results indicate that willingness to pay for environmental attributes was only realised if
sensory expectations were fulfilled. Quality remained the main trigger for a price premium.
Furthermore, researchers stated that price premium has to cover increased production costs of
organic farming. DELMAS AND GRANT (2014) tested the effect of eco-certification and
labelling practices on wine prices in the US. 13,400 wine characteristics such as wine price,
quality rating, variety, vintage, and quantity were examined between 1998 and 2005.
Research distinguished between certified organic and organic labelling effects. Outcome
displays that certified organic increased price by 13%, while eco-labelling reduced prices by
20%, because of negative associations towards eco-labelled wines.
Besides the demand for organic wine, some studies were drawn from a producer side. HOUGH
AND NELL (2003) examined production costs and revenues of organic farmers by a one-shot
case study approach of a South African farm. Research focused weather conventional or
organic farming is beneficial for wine producer. Results indicate that the attainable price
premium determines if organic farming is beneficial or not, since yield per ha was lower and
costs slidely higher. ZILBER ET AL. (2010) examined the potential of organic and biodynamic
farming for an Argentinian winery. Information was collected from secondary data and a
single interview with the general manager of the firm. The study displayed that organic or
biodynamic wine prodution can be used as alternative business strategy in developing
countries. Nevertheless, organic farming should be used for differentiation rather than cost
orientation, as production costs rise through labor intensity by organic farming. BOUZDINECHAMEEVA (2011) analysed organic wine producers in France and Italy to observe consumer
motivation, producer motivation, production approaches and marketing strategies. 17 Italian
and 15 French wine producers were interviewed through semi-structured interviews.
Producer motivations are quite various. Furthermore, organic was seen as an ambivalent
approach recognized by risk and quality loss as well as by the lack of international
recognizable quality certification. Authours conclude heterogeneity in motivation for organic
farming is driven by EU rules and organic should be linked to quality to avoid reputation and
quality loss. SANTINI ET AL. (2011) did a case study within the Montalcino area in Italy by
analyzing the role of entrepreneurial mindset and values in defining successful strategy for
organic and biodynamic certified wineries. Outcomes showed that farming organically is not
a strategy itself for successful product differentiation. CORSI AND STRØM (2013) surveyed 171
organic farmers from Piedmont, Italy, to observe if organic wines benefit from a price
premium. Overall 304 organic wines and 85 conventional wines were collected and
compared. Region of origin and the grape variety obtained a price premium, while organic
quality did not add to price premium, but modified the impact of other variables and
commanded higher wine prices. CASTELLINI ET AL. (2014) surveyed 183 Italian wine
62 | P a g e
producers to research the main characteristics of the organic wine sector before the
inforcement of EU regulation 203/2012. The top three reasons why producers follow organic
production are ethical reasons (88.5%), higher product quality (53.8%) and product
differentiation (23.1%).
Similar to LOCKSHIN AND CORSI (2012), we conclude that the importance for organic wine is
present but strongly heterogeneous and restricted. Several studies have shown that having a
positive attitude towards green issues and a healthy lifestyle provides the necessary condition
for valuing organic and a price premium (FATOPOULOS ET AL., 2003; BRUGAROLAS MOLLÁBAUZÁ ET AL., 2005; BARBER ET AL., 2009; OLSEN ET AL., 2011). High involved consumers
who have a tendency for green consumption mainly state positive regarding organic wines
and a price markup. However, organic bears confusion regarding content in terms of quality,
processing and labelling (STOLZ AND SCHMID, 2008; BAZOCHE ET AL., 2008; ZUCCA ET AL.,
2009; SIRIEIX AND REMAUD, 2010; DELMAS AND GRANT, 2014) and inferring is double-edged
by positive and negative associations. Nevertheless, quality, price and grape variety stay the
main attribute for a purchasing decision (CORSI AND STRØM, 2013; SCHMIT ET AL, 2013).
Overall, previous studies reveal that homogenous communication and the link between
organic and quality could increase demand for organic wines (BRUGAROLAS MOLLÁ-BAUZÁ
ET AL., 2005; REMAUD ET AL., 2008; SIRIEIX AND REMAUD, 2010; MANN ET AL., 2011; OLSEN
ET AL., 2011; BOUZDINE-CHAMEEVA, 2011). Yet, most producer studies are limited through
one-shot case studies (HOUGH AND NELL, 2003; ZILBER ET AL., 2010; SANTINI ET AL., 2011)
which are incomparable regarding company structure and location. We fill the existing
research gap by using comparative case study approach to examine, whether organic
benefits as a business strategy from a producer point of view. We therefore sum up, that
based on the analysed literature, organic as a successful business strategy has to focus on the
implementation of the following strategy actions: (a) a price premium has to be commanded,
(b) expenditures have to remain constant, (c) a price premium has to exceed increased
expenditures, (d) yield has to remain stable, (e) heavy marketing activities in terms of quality
and environmental friendly communication have to be adapted.
2. Methodology
The paper aims to test the propositions a) – e) to examine whether organic entrepreneurs do
implement strategic actions to benefit from organic farming. We use comparative case study
(DUL/HAK, 2008a) approach as a research strategy, since the research […] investigates a
contemporary phenomenon within its real-life context […] (YIN, 2003). Case studies are
appropriate when analyzing complex issues (PERRY, 1998; DUL/HAK, 2008). Comparative
case studies use replication logic for hypothesis testing (EISENHARDT, 1989a;
EISENHARDT/GRAEBNER, 2007). Case study was designed by using quantitative and
qualitative data and thus following triangulation (EISENHARDT, 1989b). Quantitative data was
drawn from 940 financial statements of wine businesses through several growing regions in
Germany over a five-year period (08/09 – 12/13). Sample included 170 conventional and 18
organic-farming direct selling wineries. Key figures were counted as mean from financial
statements over a five-year period. Mean and standard deviation was calculated over all
estates and selected figures. Two groups were built (organic vs. non-organic farmer) and
compared through non-parametric Mann-Whitney-U-Test and Spearman’s Rho correlation
analysis. Qualitative data was collected by a content analysis scheme with respect to
63 | P a g e
MAYRING (2010). 18 organic wineries were asked through a semi-structured questionnaire
regarding the impacts of organic farming on several variables. Both groups were analysed
through comparative case study approach with respect to HAK AND DUL (2009).
3. Results and Discussion
Table 1 displays descriptive statistics for the analysed data through mean and standard
deviation. Standard deviation shows high dispersion within the observed groups. The size of
the wineries (ha) and labor equipment is nearly similar. Both samples almost had the same
(family) labor endowment per ha. The organic sample shows lower revenues per ha (org:
€38,231.49; conv: €40,899.77) and nearly equal expenditures per ha. While personnel
expenditures are more or less equal, material expenditures are slidely lower in the organic
sample. Logically, expenditures for crop protection was lower (org: €356.66; conv: €519.29),
since organic crop protection is basically managed by copper and sulphur. Organic wineries
had slidely lower expenditures for fertilizer (org: €166.00; €187.38). Furthermore,
expenditures for fertilizer underly a high volatility per year, since manure is not used
regularly. Results reveal findings of HOUGH AND NELL (2003) who also found less
expenditure for organic manure. The lower profits per ha (org: €6,686.98; conv: €9,249.46)
are based on lower yield that might be attained by organic farming (org: 61.79; conv: 74.51),
since revenues per litre exceed conventional wines by €0.64. Thus, results accentuate the
argumentation of SCHMIT ET AL. (2013) who argued that price premium has to
overcompensate production costs. Resulting, efficency differs between farming methods.
Mann-Whitney-U-Test (p-value < 0.05) reveals significant differences through profit per
ha*, yield in hl per ha* and efficiency* between both samples.
Table 1
Descriptive comparison of selected key figures by mean and standard deviation
Figures
Organic (n = 18)
12.54 (σ = 7.93)
Size of the wineries (ha)
0.46 (σ = 0.12)
Labor per ha
0.20 (σ = 0.12)
Family labor per ha
€38,231.49 (σ = 8,404.25)
Revenues per ha
€31,544.51 (σ = 7,570.18)
Expenditures per ha
€5,331.61 (σ = 3,102.57)
Personnel expenditures per ha
€14,460.82 (σ = 4,678.11)
Material expenditures per ha
€356.66 (σ = 271.38)
Crop potection expenditures per ha
€166.00 (σ = 250.26)
Expenditures for fertilizer
€6,686.98 (σ = 3,634.91)*
Profit per ha
€5.70 (σ = 1.67)
Revenues per litre
61.79 (σ = 13.97)*
Yield in hl per ha
924.40 (σ = 273.86)
Labor intensity in h per ha
0.83 (σ = 0.08)*
Efficiency (Expend./Rev.)
*p-value < 0.05
Conventional (n = 170)
12.64 (σ = 7.69)
0.47 (σ = 0.17)
0.19 (σ = 0.12)
€40,899.77 (σ = 14,095.07)
€31,650.31 (σ = 12,547.43)
€5,508.17(σ = 4,400.37)
€15,036.75 (σ = 7,184.80)
€519.29 (σ = 472.28)
€187.38 (σ = 254.94)
€9,249.46 (σ = 5,642.77)*
€5.06 (σ = 1.67)
74.51 (σ = 17.41)*
933.08 (σ = 346.75)
0.77 (σ = 0.11)*
Nevertheless, lower yield, which turns out as the main influencing variable, might be also
caused by quality orientation rather than organic impact. Since strong quality orientation is
accompanied by a reciprocal relation between quality (price) and yield, correlation analysis is
suitable to measure quality orientation within both groups. Table 2 displays results. The
organic sample reveals high negative significant correlation between yield per ha and price
per litre, while the conventional shows lower correlation. Deriving from table 1, the sample
64 | P a g e
was again divided through the critierion yield per ha < 61.79. Again, table 2 shows a
reciprocal relationship between observed variables. Compared to the correlation of
conventional estates (n = 40), organic estates (n = 11) indicate stronger relationship between
yield per ha and price per litre. Conclusive, businesses with high quality focus implemented
through lower yield per ha are less influenced by yield impact through organic farming.
Table 2
Correlation analysis between yield per ha and revenues per litre
Yield per ha / revenues per litre
Organic (n = 18)
Conventional (n = 170)
Organic < 61.79 hl/ha (n = 11)
Conventional < 61.79 hl/ha (n = 40)
**p-value < 0.01
Spearman-Rho
-.715**
-.507**
-.536**
-.180**
Table 3 summarizes the qualitative interviews by cross-case analysis through the propositions
a) - e) and thus follows replication logic (DUL/HAK, 2009). Positive statements that were
drawn from the interview scheme through MAYRING (2010) obtained a score of 1, while
negative statements 0. Sum was built per column to test hypotheses a) – e). Results are
discussed below.
Table 3
Cross-case analysis with respect to HAK AND DUL, 2009
(a) Price
(b) Constant
(c) Price premium
Cases
premium
Expenditures
> expenditures
Case 1
1
0
0
Case 2
0
0
0
Case 3
0
0
0
Case 4
0
0
0
Case 5
0
0
0
Case 6
0
0
0
Case 7
0
0
0
Case 8
0
0
0
Case 9
0
0
0
Case 10
0
0
0
Case 11
0
0
0
Case 12
0
0
0
Case 13
0
1
0
Case 14
0
1
0
Case 15
0
1
0
Case 16
0
1
0
Case 17
0
1
0
Case 18
0
1
0
Scores
1
6
0
(d) Stable
yield
0
0
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
6
(e) Marketing
communication
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
2
Overall, the interviewees showed a strong attitude towards green issues and explained that
organic plays a role in their private life. Particularly, healthy food, sustainability and change
of generations was mentioned as drivers for organic farming. Thus, the overall motivation
and decision for organic viticulture is driven by producer conviction and self-realization. a)
17 out of 18 organic farming entrepreneurs stated that organic does not bear a price premium
and consumers are not willing to pay a markup, since organic bears less additionally utility
for wine consumer. This is related to the fact that price premium is mainly built on wine
quality and the producer-customer-relationship. b) 12 out of 18 producers explained that
expenditures have increased by organic farming methods. However, 7 out of 18 respondents
65 | P a g e
stated that material expenditures have decreased, while personnel expenditures have
increased. Additional expenditures are related to a more labor intensive cultivation (more
frequent plant protection, intensive phytosanitary operations). Nevertheless, Table 1 displays
contradictory results derived from the financial statements and additional questions about
labor intensity and personnel expenditures. However, personnel expenditures might remain
more or less constant, since entrepreneurs do not produce financial expenditures within the
investigated data source. Thus, entrepreneurs in personal companies and partnerships are
compensated through residual profits. Consequently, increasing expenditures might be
overcompensated by additional work of the entrepreneurial family rather than additional
employees. c) Though one respondent collected a price premium (a), all other respondents (c)
did not collect a price premium that overcompensates increasing expenditures. d) Consistent
to Table 1, 12 out of 18 stated that yield is influenced by organic farming. Furthermore 3 out
of 12 explained that lower yield is linked to quality management rather than organic farming.
e) Merely, 2 out of 18 organic farming entrepreneurs communicate organic actively within
their marketing strategy, since they think that other wine attributes are more beneficial for
their customer. Conclusive, overall results reject propositions a) to e), as organic farmers do
not integrate comprehensive strategic actions within their business stratey.
4. Conclusions
The paper summarized wine related literature towards organic farming from a consumer and
producer point of view. A comparative case study approach was used to observe strategic
implementation of organic farming by combining data from finanical statements and semistructured interviews of organic wine businesses. Results indicate that organic farming does
not benefit as a wine business strategy from an economic point of view, since there is a gap in
the implementation of strategy actions. Conclusive, consumers are not able to develop a
comprehensive understanding about organic farming methods and are willing to pay a price
premium. Since producers think there is no additional utility for consumer and a price
premium that might lead to value added for producer, communication activities are
restrained. Nevertheless, as aforementioned by BRUGAROLAS MOLLÁ-BAUZÁ ET AL., 2005,
REMAUD ET AL., 2008, SIRIEIX AND REMAUD, 2010, MANN ET AL., 2011, OLSEN ET AL., 2011,
and BOUZDINE-CHAMEEVA, 2011, a transparent communication between supplier and
consumer is necessary to increase importance of organic viticulture from a consumer point of
view. Furthermore, producer should link organic to quality and implement both attributes
within a quality oriented strategy. Thereby, organic marketing activities might contribute to
consumer awareness and a price premium. Concluding from this study, the data that was used
is limited, because financial statements and the size of the sample is not representative.
Further research should focus on a multi-country study from a producer point of view to
elaborate a communication strategy that might lead to a potential price premium.
5. Literature
Barber, B., Taylor, C., Strich, S. (2009): Wine consumers’ environmental knowledge and attitudes:
Inﬂuence on willingness to purchase, International Journal of Wine Research, Vol. 2009(1), pp. 59–72.
Bazoche, P., Deola, C., Soler, L. G. (2008): An experimental study of wine consumers’ willingness to pay
for environmental characteristics. 12th Congress of the EAAE.
Bouzdine-Chameeva (2011): More risks or/and more benefits? Prospect theory application to the analysis
of the bio wines evolution in France. 6th AWBR International Conference, Bordeaux.
66 | P a g e
Castellini, A., Mauracher, C., Procidano, I., Sacchi, G. (2014): Italian market of organic wine: A survey on
production system characteristics and marketing strategies, Wine Economics and Policy, Vol. 3, pp. 71-80.
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Which success factors drive profitability of privately owned wineries?
Maximilian Iselborn
University of Gießen, Germany
[email protected]
Simone Loose
Ehrenberg-Bass-Institute, University of South Australia, Adelaide
[email protected]
Abstract:
Purpose - The study aims to identify and assess the importance of success factors that
drive economic profit of privately owned wine business.
Design/methodology/approach - Value added profitability, the degree to which a winery
can compensate its internal and external stakeholders, was chosen as measure for
economic success. Financial statements of 189 privately held wine businesses in Germany
were collected and thirteen financial and structural key figures were calculated as mean
over five years. Five economic success factors were identified by means of factor analysis
and the degree to which they can discriminate between four groups of low and high value
added profitability is assessed with analysis of variance and multiple discriminant
analysis.
Findings - Five success factors are identified of which four significantly discriminate
between different groups of economic success. Quality management, family-to-land ratio
and profitability and efficiency are the most important factors for economic business
success of privately held wine businesses besides financial structure. Avenues to validate
and extend the framework of success factors for privately held wine businesses are
outlined.
Practical Implications - Economically successful wineries benefit from scale and leverage
effects - they are significantly larger (hectare size), externally source specialised input
factors such as employing external labour and realise higher revenue per litre through
higher wine prices and better market positions.
Keywords: Wine business performance, success factors, SME business management
68 | P a g e
1. Introduction
Privately held direct selling wine businesses are an integral part of German wine production,
accounting for nearly a third of the German wine growing acreage of about 100.000 ha. They
are characterized by private ownership, small-scale operations and low market share. Besides
competition from the large import market share of about fifty percent these family businesses
also face strong competition from two other main German wine producers, wine cooperatives and wine cellars which have more access to scale and synergetic effects. While
larger businesses can invest in technology, assets and skilled labour to create comparative
advantage, small businesses have to deal with their restricted capital and labour endowments
{Laforet, 2006 #13}. Nevertheless, small sized wineries show a large dispersion in economic
success and reasons for these differences are not well understood {BMEL, 2015 #1}.
Privately held wine businesses undergo structural change where wine businesses with acreage
below 5 ha are losing production and market share. Business succession is another current
economic threat where earnings from the wine business ought to provide sufficient income to
compensate two family generations to make a succession worthwhile. For a company to be
sustainable in the long run and to be attractive for business succession, all internal and
external stakeholders need to be compensated. It is therefore of interest to examine, which
factors drive profitability of privately held wine businesses. We aim to identify success
factors and to understand their relative importance for economic success and competitiveness
from analysing financial statements of privately held wine business in Germany. Thereby this
research synthesises so far distinct research streams in economic wine business performance.
2. Literature Review
The examination of firm performance has a longstanding history in management research
{Richard, 2009 #4} and there exists a large variety in the measurement of different business
performance constructs {Murphy, 1996 #6}. Likewise studies in the agribusiness sector
focused on different aspects of economic success and use different measurements for its
operationalisation {Dautzenberg, 2005 #8;Theuvsen, 2010 #3;Diez-Vial, 2011 #9;Nehring,
2014 #5;Gellynck, 2015 #11} but so far there is no study analysing comprehensive success
factors. Similar research in the wine sector is rather scarce. One stream of research focused
on analysing relationships between banks and wine businesses and effects on their financial
structure {Cadot, 2006 #7;Cadot, 2011 #2}. These studies concluded a strong relationship
between financial structure and business scope. For instance, compared to wine growers wine
producers were found to require more debt capital and had bigger sized businesses.
A second stream of wines business research analysed financial statement information and
related it to single financial or economic indicators. {di Montezemolo, 2006 #10@@authoryear;Di Montezemolo, 2006 #10} related financial profiles of Italian wines to key figures
from financial statements and identified the business model and business size as the main
model for competitiveness. Larger companies had higher performance in terms of
profitability, growth and financial capacity. {Iselborn, 2014 #12@@author-year} analysed
different components of wine business income and derived the measure of value added
profitability (VAP) and compare it between different German wine growing regions and
different wine business sizes on a descriptive level.
69 | P a g e
Existing studies in wine business performance largely focused on relationships between few
financial and structural figures and performance indicators. Jointly they suggest that small
wineries have to ensure high productivity and efficiency concerning their production,
financial structure and marketing activities to achieve economic success but it is unclear to
what degree these components differ in their impact on economic success. Therefore there is
a need to better understand holistic success factors and to finally derive a comprehensive
model about success related factors in wine business research. This explorative study aims at
identifying underlying (latent) success factors from a large set of financial and structural data
that can discriminate between economically successful and unsuccessful wine businesses and
allows an assessment of the relative importance of different drivers of economic success.
3. Empirical measure of economic success in privately held wine businesses
Overall, (wine) business success is a construct consisting of financial and non-financial goals
{Etzioni, 1964 #14; Corkindale, 2003 #15}. However, sufficient economic performance has
to be obtained to attain non-financial goals, such as esteem and reputation. We therefore
make the assumption that reaching financial goals is a necessary condition to achieve nonfinancial goals, such as satisfaction, personal achievement or self-realization.
Sufficient business performance can be defined as the economic value that covers internal
and external financial interests {Iselborn, 2014 #12}. It includes the compensation of
contractual (external) and residual (internal) income. Thereby contractual income addresses
employees, creditors and landlords of a lease, while residual income is distributed to the
entrepreneurial family. According this definition sufficient economic value added is given
when the achieved operating income within a specific period equals the value added required
to cover opportunity costs such as imputed costs of lease, interest costs and entrepreneurial
salary. Value added profitability (VAP) as therefore defined as follows:
VAP = Operating income / Required economic value added
Where:
Operating income
= Expenditures (Personnel, Lease, Interest) + Profit
Required economic value added = Expenditures (Personnel, Lease, Interest) +
Entrepreneurial salary + Cost of Lease + Cost of Equity
When dividing the operating income by the required economic value added the quotient
represents the compensation level. A quotient of 100 % indicates that businesses are able to
compete successfully through comprehensive compensation of internal and external interest
groups. Their profit fully compensates the opportunity costs. Contrary, a quotient <100%
indicates insufficient economic success and a quotient >100% signals that the wine business
is able to accumulate profit as assets for future investments.
4. Data and Methodology
This study limits to privately owned wineries in the private legal form (personal companies &
business partnerships) that are owned and managed by the entrepreneurial family, where the,
main source of income and at least 80% of the turnover stem from sales of wine bottles.
70 | P a g e
Data was collected from annual financial statements over a five year period between the
fiscal years 2008/09 and 2012/13 from 189 wine businesses, representing 945 financial
statements. Wine businesses were asked to provide additional information about labour
endowment and surface under vines in each of the observed years. We calculated nine
selected key figures as mean over a five year period. The figures contain information related
to factor endowment, accounting ratios, structure, and efficiency and productivity figures.
Additionally, we calculated imputed costs for lease, bounded equity and an entrepreneurial
salary. All figures and calculations were drawn from official statistics from The Federal
Ministry of Food and Agriculture, Germany {BMEL, 2015 #1}.
The total number of 189 wine businesses was split into four success groups according their
value added profitability (VAP), see Table 1. First an ANOVA is conducted to describe the
success groups by nine selected performance and structural figures. To identify latent success
factors explorative factor analysis with varimax rotation was conducted with key structural
and financial figures selected and reduced after correlation analysis. Finally ANOVA and
multiple discriminant analysis were used to examine which factors separate the observed
success groups.
5. Results and Discussion
In a first step the four success groups are described by typically used key financial statement
figures (see Table 1).
Table 1: Comparison of success groups (SG)
SG1
SG2
100% ≤ VAP
VP ≥ 130%
< 130%
Variables
n = 44
n = 54
VAP (%)
1.56A
1.14B
A
Profit per ha (€)
15327.77
9031.88B
A
Turnover per ha (€)
47819.59
41756.74AB
Production costs per ha (€)
33318.07
33027.94
Revenue per litre
5.87A
5.098AB
Yield per ha (hl)
77.25
73.08
Size (ha)
16.21A
12.2AB
Family labour per ha
0.17B
0.17B
Labour per ha
0.29
0.29
SG3
75% ≤ VAP <
100%
n = 59
0.89C
6455.38C
36433.54BC
30504.92
4.83B
73.19
12.32B
0.20B
0.26
SG4
F
Sig.
VAP < 75%
n = 31
0.62D
5634.18C
32666.03C
29001.91
4.65B
68.28
7.71C
0.31A
0.23
n = 188
321.12
0.000
51.38
0.000
10.42
0.000
1.18
0.319
4.57
0.004
1.62
0.186
8.31
0.000
12.07
0.000
1.48
0.221
Note: Tukey-B post hoc test, factor levels with different superscript are different at p-value < 0.05
It is not surprising that the variable VAP used to delimitate the groups is highly significantly
different. Strong differences can also be found for profit and turnover per ha, which are
significantly higher for the economically successful groups SG1 and SG2. These two groups
achieve higher profits and turnover per ha and hold a greater estate size and are characterised
by a better family-land-ratio. Thus, less family labours manage and cultivate more wine
growing area compared to the less successful groups. Production costs that are the remainder
of profit after deducting other costs are not different between the groups. There are two main
factors that affect a wine business’ turnover, the yield per ha and the revenue per litre,
reflecting the price at which the wine is sold at the market. We could not observe significant
differences for yield per ha but differences for revenue per litre and size suggest that
successful wine businesses are efficacious in both producing wine quality and marketing their
wine and have sufficient scale effects. Observed differences for family labour per ha are also
71 | P a g e
related to scale or leverage effects but labour endowment with employees is relatively similar
between the groups.
Results from the explorative factor analysis are shown in Table 2. Kaiser-Mayer-Olkin
criteria (0.63) and Bartlett’s test (0.000) record acceptable quality for factor analysis. Factors
with Eigenvalue > 1 were extracted after varimax rotation. A five factor solution was found
that account for 86 % of variance, all communalities were > .70.
Table 2: Success factors - explorative factor analysis of selected key figures
Factor Loadings
1
2
3
4
Profitability
& Efficiency
Return on equity (%)
Return on investments (%)
Total efficiency (%)
Production efficiency (%)
Material expenditures per ha (€)
Personnel expenditures per ha (€)
Turnover per ha (€)
Area under cultivation (ha)
Family labour per ha
Asset coverage (%)
Debt ratio (%)
Assets per ha (€)
Depreciation per ha (€)
Eigenvalue
Quality
Management
Size
Financial
Structure
5
Production
Endowment
.81
.86
-.84
-.81
.90
.79
.91
.87
-.88
-.91
.91
3.373
3.053
2.411
1.328
.89
.81
1.023
Communality
.92
.88
.95
.93
.87
.82
.76
.83
.89
.88
.90
.83
.74
11.19
Factor 1 represents capital profitability in terms of equity and debt capital investments as
well as production efficiency. While return on equity represents the relationship between
capital investments and a achieved profit, total and production efficiency assess the ratio of
input of production factors and production output. Therefore this factor is named Profitability
and Efficiency. The fact that both material and personnel expenditures as well as turnover
highly load on the same Factor 2 suggests that businesses with more (less) turnover also
have higher (lower) expenditures. This seemingly surprising finding suggests that higher
turnover can be achieved when specialised input of material and personal is rather bought
externally (resulting in expenditures) than generically produced internally by the
entrepreneur. Therefore factor 2 is named Quality Management. Factor 3 embodies the Size
effect (cf. Table 1) and can be interpreted as a family-land ratio. Factor 4 represents the
Financial structure of a wine business, an increase of debt reduces asset coverage. However,
steady investments are crucial for the maintenance of assets and new operations and therefore
a high debt ratio might potentiate economic success. Factor 5 loaded by asset intensity and
asset related depreciation stands for Production Endowment, where, high assets per ha signal
comprehensive investments in production facilities.
To examine the discriminatory power of the four identified success factors in classifying the
businesses in our sample into the four success groups we conduct a multiple discriminant
analysis. To discriminate between four groups three functions were calculated and results
from the first function with the highest explanatory power are shown in Table 3. Overall the
results of the discriminate analysis suggest that four out of the five identified success factors
are highly successful in discriminating between the four success groups. Using the success
72 | P a g e
factors 85.1 % of the businesses were correctly classified, squaring this correlation indicates
that 79 % of the dependent variable is explained and groups are highly significantly separated
(Wilks-Lambda 0.19, χ² = 297.12, p<0.001). This suggests that four of the five identified
success factors are highly discriminative in grouping wine businesses in success groups
according their value added profitability.
The standardised coefficients and F-Values suggest that factor 2 “Quality Management” is by
far the most important success factor in discriminating between VAP groups followed by
factor 3 “Size”, factor 4 “Financial Structure” and factor 1 “Profitability and efficiency”.
Factor 5 “Production Endowment” was not significant in discriminating between the success
groups.
Table 3: Multiple canonical discriminant function
Stand.
Success factors
Wilks-Lambda
coefficients
1
Profitability and efficiency
.54
.94
2
Quality management
1.20
.39
3
Size
.80
.86
4
Financial structure
-.31
.92
5
Production endowment
.22
.97
F-Value
p
3.46
94.45
9.41
4.69
0.95
.017
.000
.000
.003
.420
Notes: Eigenvalue = 3.68; Percent of variance explained = 97.8%; Canonical correlation= 0.89, Wilks-Lambda
= 0.19; χ²= 297.12; p= .000, Percent of correct classification: 85.1%
To better understand how the four success groups differ in the success factors identified an
ANOVA was conducted and results are displayed in Table 4.
Table 4: Comparison of success groups (SG) and success factors (SF)
SG1
Success factors
1
2
Profitability and
efficiency
Quality management
3
Size
4
Financial structure
5
Production
endowment
p
SG3
75% ≤ VAP <
100%
n = 44
n = 54
n = 59
n = 31
.29A
.14AB
-.16AB
-.35C
3.46
0.02
1.22A
.12B
-.48C
-1.03D
A
-.05
A
-.02
A
VP ≥ 130%
.44
A
B
.11
A
.05A
-.31
.22
-.10
-.04
SG4
F
SG2
100% ≤ VAP <
130%
VAP < 75%
n = 188
94.45
0.00
B
9.42
0.00
B
4.69
0.00
-.06
0.95
0.42
-.71
.51
Note: Tukey-B post hoc test, factor levels with different superscript are different at p-value < 0.05
Success groups are strongest differentiated in Factor 2 “Quality Management”, where more
successful groups have higher turnover and externally bought input (staff, material).
Accordingly, having a high site-specific turnover under consideration of material and
personnel expenditures is critical for economic success. High site-specific turnover can be
achieved through simultaneous optimization of wine price (affecting revenues per litre) and
site-specific yield per ha (affecting total revenue). High market prices is likely to be a result
of a strong market position achieved through marketing activities and the usage of profitable
distribution channels such as cellar door and specialty retail stores. When maximising sitespecific yield per ha a winery has to consider the effect on wine quality, which deteriorates at
too high yields, and has to comply with European maximum wine yield regulations.
73 | P a g e
Factor 3 “Size” is the second strongest discriminator and particularly the group with lowest
VAP (SG4) has a poor family-land ratio while the more successful groups attain a better
family-land-ratio and benefit from leverage and degression effects. Accordingly, successful
entrepreneurial families are able to manage and cultivate a greater business with less family
labour endowment than the less successful. This is consistent with findings from {Di
Montezemolo, 2006 #10} who showed that greater size increases financial performance.
Profitability and Efficiency (Factor 1) are relevant for economic success, since small
businesses are limited by their production capacity. Accordingly, both capital (investment of
equity and debt capital effecting financial efficiency) and production factors (affecting
production efficiency) have to be treated highly efficient to generate sufficient value added.
Economically successful business (SG1 and SG2 in Table 4) show positive factor values for
profitability and efficiency, while negative signs for less successful businesses (SG3 and
SG4) implicate lower capital efficiency and poorer input-output ratios of production factors.
Finally, Factor 4 representing a wine businesses’ Financial structure is the third strongest
discriminator. Here we observe a very interesting non-linear effect, where the least successful
and the most successful groups have lower asset-coverage and accordingly higher debt.
Contrary both middle success groups hold lower debt. This surprising finding for SG1 might
be related to the fact that successful estates have to steadily invest into business growth, while
unsuccessful businesses primarily raise capital to ensure liquidity. Further research is needed
to validate this. Results agree with previous findings from {CADOT, 2006 #7} as well as
{Cadot, 2011 #2} who stressed financial gaps and loan contracts in wine entrepreneurship.
6. Conclusions
This study synthesized research into economic business success of wine businesses by
exploring success factors from a comprehensive set of financial and structural data. Five
success factors were identified of which four significantly discriminate between success
groups based on value added profitability.
Quality management reflecting a business’ market position and viticultural yield was by far
the most important success factor and so far has received little attention in economic business
research for wineries. This success factor suggests that successful businesses are both able to
attain higher prices and yield per ha. Future research in economic business performance
should therefore also include businesses’ marketing and viticultural activities. Size effects,
profitability and efficiency as well as financial structure are other success factors identified in
our sample of German wineries. These three factors partially agree with previous research but
their relative importance for economic success was so far unclear.
There are several avenues for future research. The discriminant ability of success factors
should be externally validated out-of sample both for German and international wine
businesses. Our sample size was too small to allow for a hold-out sample. Also differences in
the legal framework (e.g. maximum yield regulations) between wine growing countries (e.g.
old world vs. new world) should be examined, which will likely provide insights into the
economic efficacy of yield restrictions. The number and scope of variables included into the
framework should be extended to allow a better understanding of important factors, such as
Quality Management.
74 | P a g e
7. Literature
BMEL 2015. Ertragslage Garten- und Weinbau.
CADOT, J. 2011. Collaterals, Bank Monitoring and Performance: the Case of Newly
Established Wine Farmers. 6th AWBR International Conference. Bordeaux.
CADOT, J. & COUDERC, J.-P. 2006. Financing vineyards acquisitions: a monitoring role
for the bank? 3rd AWBR International Conference. Montpellier.
CORKINDALE, D. & WELSH, A. 2003. Measuring success and marketing in small wineries
in Australia. International Journal of Wine Marketing, 15, 4-24.
DAUTZENBERG, K. & PETERSEN, V. 2005. Erfolgsfaktoren in landwirtschaftlichen
Unternehmen Success factors in agricultural enterprises. German Journal of
Agricultural Economics, 54, 331-340.
DI MONTEZEMOLO, S. C. 2006. Profitability, Growth and Corporate Value of the Wine
Companies. 3rd AWBR International Conference. Montpellier.
DIEZ-VIAL, I. 2011. Geographical cluster and performance: The case of Iberian ham. Food
Policy, 36, 517-525.
ETZIONI, A. 1964. Modern Organizations, Prentice-Hall, Englewood Cliffs.
GELLYNCK, X., CÁRDENAS, J., PIENIAK, Z. & VERBEKE, W. 2015. Association
between Innovative Entrepreneurial Orientation, Absorptive Capacity, and Farm
Business Performance. Agribusiness, 31, 91-106.
ISELBORN, M. & MEND, M. 2014. How successful are German wine enterprises? A value
added & business profit based analysis. . 8th AWBR International Conference.
Geisenheim.
LAFORET, S. & TANN, J. 2006. Innovative characteristics of small manufacturing firms.
Journal of Small Business and Enterprise Development, 13, 363-380.
MURPHY, G., TRAILER, J. & HILL, R. 1996. Measuring performance in entrepreneurship
research. Journal of Business Research, 36, 15-23.
NEHRING, R., GILLESPIE, J., HALLAHAN, C., MICHAEL HARRIS, J. & ERICKSON,
K. 2014. What is driving economic and financial success of US cow-calf operations?
Agricultural Finance Review, 74, 311-325.
RICHARD, P. J., DEVINNEY, T. M., YIP, G. S. & JOHNSON, G. 2009. Measuring
organizational performance: Towards methodological best practice. Journal of
Management, 35, 718-804.
THEUVSEN, L., HEYDER, M. & NIEDERHUT-BOLLMANN, C. 2010. Does Strategic
Group Membership Affect Firm Performance? An Analysis of the German Brewing
Industry. German Journal of Agricultural Economics, 59, 61-76.
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Innovation strategies for resilient SMEs:
A case study in the Italian wine industry
Elisa Conz
University of Pavia, Italy
[email protected]
Stefano Denicolai
[email protected]
Antonella Zucchella
[email protected]
Abstract:
Purpose: The Italian wine system is now facing new challenges, withstanding a globalized,
complex and competitive market. To deal with increasing external and internal threats
companies need strategic resilience, a capacity to self-renew over time.
The aim of this work is to investigate which are the innovative strategies deployed by resilient
SMEs to react and adapt to unexpected changes.
Methodology/approach: Two Italian wineries have been investigated trough a longitudinal
multiple case study analysis. Companies have been selected according to the match pairmethod. A conceptual framework adapted from Reinmoeller and van Baardwijk (2005) is
proposed to investigate the argument.
Findings: show that a resilient company is able to employ a dynamic balance of strategies,
constantly adapting to changing environmental conditions.
Practical implications: Our study wants to contribute to the literature on the resilience of
SMEs, proposing a deeply investigation of the Italian wine system. Furthermore it offers
insights for practitioners and institutions in the field.
Keywords: SMEs, resilience, strategy, Italy, wine industry
76 | P a g e
1. INTRODUCTION
The role of SMEs [1] in the global market is worldwide recognized, especially in the
European contest, characterized by more than 90% of small businesses. In such a competitive
market SMEs face new challenges and goals. Firms have to deal with a global competition,
new consumer behaviours and expectations, new technologies and a series of unpredictable
events at economic, social and institutional level. This set of uncertainty has given new
attention to the capacities of a local system and its firms to adapt and pro-act to internal and
external shocks. The new challenge is survive over time, adapting to a continuous
unpredictable economic environment. From this point of view what is relevant is the notion
of “Resilience”. Starting from the seminal works carried out by Holling (Gunderson and
Holling, 2002; Holling, 1973; Walker et al., 2004) reformulated by Simmie and Martin
(2010) resilience is described as an adaptation process developed to survive over time,
continuously self-renewing. From an evolutionary point of view the external events like
global competition, technological changes and economic crises, are the exogenous shocks
that force a system to change and evolve from a state of equilibrium to a new stage of
reorganization.
In strategic management studies resilience is defined as a process capability. Consistently to
the evolutionary approach resilient companies are those able to act before the shock occurs
and the need for change becomes obvious (Hamel and Välikangas, 2003). The strategic
vision of resilience is what Martin (2012) identifies as adaptive resilience, the ability of a
system to minimize the impact of a shock through anticipatory or reactionary forms of
organization. This study deals with the strategic resilience of firms in the wine industry.
The investigation of the possibilities that a firm has to renewal itself when it faces
unpredictable events it’s a relevant topic both from an academic and an institutional
perspective. Studies on the resilience of firms and local systems are on the rise but there are
several gaps, especially concerning a firm perspective that considers which are the innovative
resources, internal and external, that influence the resilience of SMEs. Furthermore limited
research has been addressed concerning resilience in the context of wine industry (Flint et al.,
2011) and especially in the Italian wine context (Duarte Alonso and Bressan, 2015) that is
more generally under investigated.
The aim of this work is to understand which are the innovative strategies, deployed by
resilient firms, to survive over time. Two Italian wine companies have been investigated
trough a longitudinal multiple case study, understanding how innovation strategies and
organization’s resilience are correlated.
A conceptual framework adapted from Reinmoeller and van Baardwijk (2005) is proposed to
investigate the argument. Our study wants to contribute to the literature on the resilience of
SMEs in the context of wine industry. Furthermore it offers insights for practitioners and
institutions in the field.
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2. CONCEPTUAL FRAMEWORK
Literature concerning resilience within the context of SMEs is quite recent. The concept of
resilience is applied to a wide range of disciplines but it’s always representative of the
capacity of an individual, an organization, a system to adapt and react to unexpected events.
Management scholars investigate the resilience of SMEs to understand how enterprises face
unpredictable transformations in the global scenario, like an economic crisis at industry and
global level or changing in consumers’ behaviour and expectations.
Beside that some organizations, despite facing the same shocks in the same place, overcome
these events and are able to adapt while others fail. The reaction to the “Unexpected” depends
on the resilience of the firm.
Bhamra et al. (2011) based on 74 papers and corresponding definitions at firm level defined
three main elements of resilience: readiness and preparedness, response and adaptation,
recovery or adjustment.
Sheffi and Rice (2005) analysed how a shock impacts on the supply chain of an enterprise. A
disruption can affect the performance of a firm in unpredictable ways and consequently the
more a firm is resilient the more can decrease its vulnerability. A low vulnerability can be
achieved working on redundancy and flexibility. Redundancy, in the sense of keeping some
resources in reserve, is a common process of any resilient strategy but has limited benefits.
On the other hand increasing the flexibility of the supply chain, building organic capabilities
that perceive threats and quickly respond to shocks, can enforce the enterprise resilience and
create competitive advantage in the market.
Chrisman et al. (2011) contributed to the entrepreneurship literature investigating the
resilience of family firms and the aspects of their organizational form that lead to a durable
activity. Arranged marriage, long-term orientation, multitemporal perspectives, knowledge
structures, innovation, social capital and social exchange are the set of characteristics and
behaviours that contribute to the resilience of family firms.
Analysing the factors that influence the resilience of SMEs, Garmestani et al. (2006) argued
that the capacity of a firm to manage a disturbance and to develop new solutions it’s due, at
organizational level, to firm dynamics (e.g. size, diversity, employment variance) and at
geographical level to the location and the proximity to other firms.
Gunasekaran et al. (2011) developed a conceptual framework pointing out key factors for the
competitiveness and resilience of SMEs. Organizational behaviour and managerial
characteristics are the internal factors that influence the quality of the final goods and services
produced by the firm. Enabling factors, like new technologies, marketing competences,
integrations in the supply chain, the location of the business, represent opportunities that a
firm can use to strength and improve its production. External factors are identified in the
globalization of the markets.
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Reinmoeller et al. (2005) investigated the role of innovation strategies in the resilience of
firms, trough a longitudinal multiple case study, defining resilience as “The capability to selfrenew over time through innovation”, identifying a set of resources that are either internal
and external, already in use or being created. Authors assert that resilient companies are those
that continuously adapt their behaviours to the changing environment and manage a dynamic
balance of four innovation strategies: knowledge management (i.e. using and reusing of tacit
or explicit knowledge within the firm); exploration (i.e. creation and recombination of
existing knowledge, trough research and development activities); entrepreneurship (i.e. find
new solutions and new resources beyond the boundaries of the firm); cooperation (i.e.
recombination of complementary knowledge of the partners in the same industry). The key
element is the diversification of strategies that lead to maximize the adaptation of the
company.
Based on these premises we elaborated a conceptual framework (Figure 1) to investigate the
argument, adapting the model proposed by Reinmoeller et al. (2005). Four innovation
strategies are grouped, combining internal and external factors trough a temporal dimension.
The time t represents the actions that are commonly in use, the time t+1 all the actions and
capabilities that are deployed to create something that will be used.
The framework of innovation strategies has been integrated grouping practices according to
the three typologies of factors, proposed by Gunasekaran et al. (2011), that can foster the
resilience and competitiveness of SMEs. Factors are categorized as internal (i.e.
organizational behaviour, managerial characteristics), external (i.e. cluster dynamics,
globalization, shocks, economic crisis) and enabling (i.e. use of technology, generation of
capital, location and marketing, supply chain integration).
Figure 1: conceptual framework, adaptation from Reinmoeller et al., (2005).
The organizational strategy is pursued within the firm recombining existing knowledge (both
tacit and unexplored) and human capital in the organization. The innovative phase is carried
out within the firm and involves the creation of new ideas and resources. The cooperative
strategy aims at sharing internal knowledge and competences with external partners in the
same industry. The entrepreneurial strategy starts within the firm but goes beyond the
boundaries, sharing an entrepreneurial mentality among the industry stakeholders.
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Entrepreneurial activities, such as the creation of new businesses, spin offs, start-ups and
external corporate venturing, are the essence of this practice.
3. METHODOLOGY
A longitudinal multiple case study research was carried out, adopting methods and principles
proposed by Eisenhardt, (1989). According to the match pair method case studies have been
chosen as polar types in which the investigated processes have been “transparently
observable”. Protocols were developed following Yin (2009) to aggregate data in a clear and
consistent way. Qualitative and quantitative data from selected case studies were collected by
multiple collection methods and analyzed through descriptive statistics and qualitative data
analysis techniques, considering as interval of analysis the last decade. Primary data were
obtained thanks to in depth interviews with managing directors and focus groups with experts
in the field. The National Institute for Statistics, the local Chamber of Commerce and the
Bureau van Diijk-Orbis datasets have been consulted for secondary data.
3.1 Context of analysis
In a scenario strongly influenced by competitive forces and exposed to an extremely
challenging environment, innovation has become one of the key factors for the resilience and
performance of wineries, especially for the old-tradition European ones.
The wine industry is worldwide characterized by fragmentation and SMEs. Especially in the
century-old European contest (e.g. Italy, Spain, France, Germany) wineries are for the
majority family enterprises, correlated to the territory. On the contrary new wine markets as
Australia, New Zealand, South Africa, Argentina, Chile and US are structured and wellorganized players in the global scenario challenging the dominance of European producers.
The Italian wine sector is an old tradition system characterized by a fragmentation of
thousand of SMEs. Italy is the second wine word producer and leading exporter. The constant
decreasing of domestic wine consumption has forced wineries to open to international
markets. In such a context innovation processes are essential to grow and profit, but the
national system it’s still polarized between winemakers adhering to a traditional local market
(i.e. low innovators) and those looking to the global markets (i.e. high product and marketing
innovators). As opposite to the Australian system, the Italian one has weak
interorganizational collaborations and networks that don’t support enough local wineries.
Consequently the performance of Italian organizations is more influenced by firm internal
factors than external ones.
The recent conditions of the market and the need of a renewal in such a traditional and
conservative industry increased the attention of management and business studies (Orth et al.,
2007), especially concerning Entrepreneurship (Brown and Butler, 1995; Delacroix and Solt,
1987; Zhao, 2005), International Entrepreneurship (Lamb et al., 2011; Mariani et al., 2012),
Strategic Management (Atkin et al., 2012; Porter and Bond, 1999), International Business
(Kidwell and Fish, 2007) and Innovation Management (Aylward and Glynn, 2006; Dressler,
2013; Sánchez-Hernández et al., 2010) studies. A search for articles and authors evidences
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also that studies carried out in Australia and in the so called “New World” markets are the
broadcast area.
Studies carried out by Aylward and Glynn ( 2006) and Aylward (2002) are of particular
interest and investigate how innovation processes and R&D influence the performance of
firms in the Australian wine industry. Beside that Dresller (2013) explored the innovation
activities of German wineries, observing a shift of innovation from production processes to
services, with a decreasing centricity of the product in the industry.
1.1. Case studies description
Two wineries have been selected trough the match pair method and chosen as polar types.
They have both a century old tradition and perfectly represent a case of resilient enterprise.
They belong to the same territory, the Oltrepò Pavese, an hilly area in the Northern Italy. This
area hosts more than 1600 wineries and grape producers and represents the third biggest
Italian wine district in terms of vineyards surface (13.269 hectares). From the end of WWII
both wineries evolved significantly, becoming leading national players in the 80s, thanks to
their sparkling white wine, from the vinification of Pinot Noir, sold as bulk or bottled. Along
years they increased profits reacting to numerous unexpected events but starting from the
new millennium their paths became extremely divergent.
Both wineries experienced a lock-in effect and subsequently the consequences of the
domestic decreasing in wine consumptions, plus a worldwide competition from Old and New
World players. One company has been able to adapt and react while the other is still
experiencing a deep crisis.
4. FINDINGS
The key contributors to the low adaptability and resilience of the failed company can be
found in the analysis of its innovative strategies. At organizational level the internal
disagreement of the board and cash flow constraints stopped the development of new
commercial and technological pathways. The absence of innovative and entrepreneurial
strategies limited the adaptation to the external changes of the market. The focus on
cooperation efforts characterized by merging and acquisitions redistributed the risk but also
reduced innovation investments and increased the lock-in effect. The dependency from the
local GDO distribution, in an Italian wine system that today profits more than the 50%
abroad, slowed even further a rebirth phase.
On the contrary the successful company invested in technological equipments, buying new
tubs and autoclaves. Quality production was increased and security and efficiency of the
whole production process were emphasized. New entrepreneurial decisions focused on
foreign markets were taken in place. A differentiate offering, an increasing quality production
and proper marketing campaigns fostered the recovery of the firm.
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Financial statistics sustain that positive trend: for the first time since 2009 the annual asset
turnover ratio (i.e. Turnover/Total assets), that indicates the efficiency of a company to
deploy its assets, has started growing again, moving from 0,85 (2013) to 0,89 (2014).
Conversely the bankrupt company still markets a regression with the lowest value ever: 0,30
(2014).
5. DISCUSSION AND CONCLUSIONS
This work aims at understanding how resilient SMEs adapt and react to external shocks and
thanks to which practices. Based on previous studies on the resilience of organizations, we
applied in the context of wine industry the framework of innovation strategies proposed by
Reinmoeller and van Baardwijk (2005). The Italian wine system has not been quite
investigated and recently is facing a radical innovation and technological changing. Polar
case studies have been selected for their common history and development path.
The first winery is the less successful, it’s still in a declining phase not finding solutions to
get out of stagnation. On the contrary the second case shows a resilient enterprise that,
despite faced the same issues, is now on a growing phase, increasing its resilience not only
trough investments in innovation and a technological renewal but also developing adequate
marketing and entrepreneurial strategies.
Findings, that have briefly resumed, suggest that a resilient company is the one that is able to
employ a dynamic balance of all the four strategies, constantly self-renewing, adapting to
changing environmental conditions. Focusing on one strategy, as the second company done,
could lead to reduce the risk in stable times but during turbulent periods it will not foster
resilience. As argued by Reinmoeller and van Baardwijk (2005) and according to
evolutionary theory on strategic resilience, pursuing several different strategies increases
diversity maximizing the chance of prosper adaptation. The understanding of strategic
diversity is a key element in order to build resilient companies and has to be planned by
managers as a long term strategy and not as instinctive reaction to unexpected shocks.
Proposed considerations may prompt winery managers to contemplate and implement
responsive strategies to perceived challenges and impacts, working on building resilience.
These practical strategies may also support local institutions and guidance to a more
willingness to invest in the winery business, positively exploiting the strength of ties and
connections, promoting policies to support enterprises.
Further studies will aim at increasing the number of case studies enhancing the contribution
of the research in the field and the development of a theory on the resilience of SMEs, that is
still weak.
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6. ENDNOTES
[1] Enterprises which employ fewer than 250 persons and which have an annual turnover not
exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro
(European Commission, 2015).
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The Finicky Grape Winery Action Research in Wine Accounting
David S. Korb
Linfield College, United States of America
[email protected]
Sharon L. Wagner
Linfield College, United States of America
[email protected]
Abstract:
Purpose: A project designed to build a knowledge base of wine industry-specific useful
practices was undertaken over a two-year period. The vehicle for the project was a case
exercise in cost accounting that brought together winery professionals and academics. The
project constituted both a) action research for organization development, through direct
benefits to participating wineries, and b) classroom action research via reflective learning.
Design: A case documenting the story of a fictitious winery in Oregon, U.S.A. was
developed for use in a 2014 administration of a cost accounting course, then improved and
enhanced for the 2015 administration of the course. Design and implementation of the
project followed the discovery-action-reflection model of action research, and provided a
foundation for a strengthened industry/academic partnership through the reflective process
of classroom action research.
Findings: Student course evaluations, feedback from participating wine professionals, and
structured reflections by the instructor across the two iterations of the course revealed that
the case exercise led to acquisition and dissemination of knowledge in wine accounting.
Practical Implications: Developing a knowledge base of cost accounting practices specific
to the wine business is beneficial for the local industry. The immersive process of
developing the exercise provided the instructor with insights to further improve the
students’ educational experience, while building stronger connections between the
academic program and the local wine community.
Keywords: Wine accounting, action research, classroom action research, cost accounting,
Oregon wine
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1. INTRODUCTION
As in other wine regions throughout the world, a lack of industry-specific accounting
knowledge is a challenge for the growing Oregon wine industry. The wine industry presents
an additional layer of complexity for the accountants, over and above typical cost
accounting practices, and there is a lack of wine industry-specific research in the published
accounting literature. In Oregon, most small wineries do not employ an accountant on staff.
An Oregon college has taken a step toward building a knowledge base to support the
industry with solid accounting knowledge and practices. A vehicle for building this
knowledge base is a comprehensive case exercise in wine accounting used in a cost
accounting course.
Development and implementation of the exercise took the form of an action research
project, in which local wine industry experts worked in partnership with the course
instructor (this paper’s first author) and students.
2.1. The Oregon Wine Industry and Wine Accounting
The first wine grapes may have been planted in Oregon, U.S.A. as early as 1847. The
modern era of Oregon wine, however, was launched in large part by a handful of pioneers
who settled in the Umpqua Valley and Willamette Valley in the 1960s (Oregon Wine, 2015).
By the 1970s Oregon was considered a newly established wine region with an emphasis on
artisanal and sustainable growing and production. (Hall and Paris, 2001).
With more than 600 wineries, Oregon is now the third largest wine grape producing state in
the U.S., (Oregon Wine, 2015). Although Oregon is best known for Pinot noir and Pinot gris,
72 wine grape varietals are grown in the state (Oregon Wine, 2015). The focus on small
batch, artisan, and sustainable wine continues to typify Oregon’s approach (Wagner et al.
2013).
Most Oregon wineries ae small, producing fewer than 5,000 cases per year (Oregon Wine,
2015).
Wine operations typically have a long cash/operating cycle, and often consist of a mix of
farming (grape growing and vineyard management), manufacturing (winemaking and
bottling), and distribution. These factors present an additional layer of complexity in cost
accounting practices for wineries. Properly trained professional accountants can help
wineries navigate this complexity, and assist winery professionals in preparing financial
reports for use by investors, creditors, managers, and others, and in making key operational
decisions in such areas as product/price mixes and capital purchases.
Small wineries like the majority of those in Oregon, typically do not employ an accountant
on staff. Accordingly, there is a substantial local need for accountants with wine industry
specific accounting knowledge. At the same time there is a dearth of wine-specific
accounting research in the academic literature and in accounting textbooks. Incorporating a
comprehensive wine industry case in a cost accounting course was a way to begin to build a
stronger local base of knowledge in wine accounting.
2.2. Action Research
Action research is applied research focused on understanding a problem and creating
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practical solutions for that problem. Reason and McArdle (2007) have identified several
defining factors of action research. It is pragmatic, addressing practical issues and linking
theory and practice. It is democratic, allowing people to create their own knowledge via
communities of multiple ways of inquiry. It makes use of knowing and is developmental in
nature, building on previously generated knowledge. Finally, it is value-oriented, seeking to
contribute to the well-being and effectiveness of people and their communities.
Action research follows a cyclical pattern of discovery, action, and critical reflection aimed
toward positive growth, generally including active participation by those who are affected
by the research, (Adelman, 1993). The case exercise discussed in this paper resulted from a
joint process of discovery, action and critical reflection among constituencies of faculty,
students, and wine professionals, with the aim of positively impacting the local wine
industry. The process of critical reflection was carried further by the course instructor,
through a process of classroom action research, to strengthen and improve the students’
educational experience.
2.3. Classroom Action Research
Classroom action research (Mettetal, 2001), is an application of the general action research
approach. Its goal is to help instructors reflect upon their teaching practices and inform
decision making about future teaching activities. The general framework for classroom
action research consists of goals, information, methods, results, reflection, and presentation.
2.3.1. GOALS
In this step, the instructor reflects on the overall goal or problem related to student learning.
In the case of the accounting course described here, the goal was to develop an experiential
learning activity to enhance students’ understanding of wine accounting. This goal was
somewhat novel for a cost accounting classroom. Such experiential activities are common in
other areas of business education such as management and marketing, but accountingfocused experiential activities are less common.
2.3.2. INFORMATION
Here, the instructor reviews relevant information, literature, and data to design the project.
The instructor reviewed several cost accounting resources when building the learning activity
(e.g. Cropsey and Peters, 1982; Dal Poggetto, 1985; Scott and Swain, 1997). To ensure
accuracy and relevance of the wine industry content of the exercise, consultation with
industry professionals was another critical component of this step.
2.3.3. METHODS AND RESULTS
The intent of these steps is to plan and carry out a methodology for assessing the effectiveness
of the educational activity. In the cost accounting course described here, triangulation of
feedback was accomplished by seeking structured feedback from students and industry
partners, and combining that feedback with the instructors’ reflections. There were two
iterations of this assessment process implemented after the first and second administrations of
the course.
2.3.4. REFLECTION AND PRESENTATION
In these final steps, the instructor reflects on what was learned from implementation of the
educational activity, takes action based upon what is learned, and disseminates the results.
In the class activity described here, critical reflection led to improvements in the second
administration of the class exercise.
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3. METHOD
An experiential learning exercise was developed as the case of a fictitious Oregon, USA
winery in need of accounting practitioners with winery-specific knowledge. Students in a
senior-level cost accounting course learned about the wine industry and its specific
accounting practices in order to build an extensive set of financial projections to help the
fictitious winery make key financial decisions.
The students began with knowledge of financial accounting and, during the first part of the
course studied the basics of cost accounting. Next, they learned about the wine industry
through reading, videos, discussion and, in the second administration of the exercise, a visit
to a local winery. They then were introduced to the case through ‘the story’ of the fictitious
winery, certain financial information from the winery owner’s business plans. The students
were then asked to build seven-year financial forecasts to be used by the owners for the
benefit of the winery. The forecasts were built as spreadsheets designed to be highly flexible
and adaptable to facilitate many iterations of the exercise.
The financial projection building process took several weeks and was punctuated by critical
review from several industry experts who met with the students to discuss their work. These
discussions focused on the reasonableness of the projections and on the quality of the
assumptions, estimates and methodologies used, which invariably led the students to improve
their forecasts. These improvements included changes to grape and packaging costs,
switching from in-house bottling to outsourcing via a bottling truck, and changes to costs and
types of capital assets needed by the winery.
At the end of the exercise, the students’ projections were viewed and critiqued at a high
analytical level by a wine accounting expert from a local public accounting firm. This
expert has several decades of extensive wine accounting experience for hundreds of
wineries/vineyards. Although students did receive feedback from wine industry experts and
their instructor, they did not have any high-level analytical accounting conversations until
their discussion with this wine accounting expert. The students presented, discussed and
defended their work with the wine accounting expert as a culmination of the exercise.
4. RESULTS
4.1. First Administration of the Case Exercise
The first administration of the case exercise took place during the spring semester of 2014.
At that time, the case was called “The Finicky Grape Winery” exercise.
4.1.1. INSIGHTS FROM STUDENT EVALUATIONS
Student evaluations from the first administration of the case exercise indicated that
students had gained industry-relevant accounting knowledge and skills in the areas of:
1. The integration of financial and cost accounting
2. ‘Real-world’ accounting experience
3. Understanding winery operations and finances
The students also indicated improvement of future projects ought to include:
1. A visit to a real winery
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2. More spreadsheet instruction prior to the start of the project
3. More specific instructions for student work
4.1.2. INSIGHTS FROM INDUSTRY PROFESSIONALS
Feedback from industry professionals who participated in the first administration of
the exercise indicated:
1. The story and nature of the fictitious winery was realistic
2. Industry professionals were prompted towards self-reflection of their business practices
3. The exercise was a good start towards understanding wine accounting
Industry professionals’ suggestions for improvement included:
4. Build statements of cash flows in the forecasts and use a longer forecast period
5. Improve sales volume timing projections
6. Make the relationship between distributor sales and its costs reasonable
4.1.3. INSIGHTS FROM INSTRUCTOR REFLECTIONS
Instructor reflections after the first administration of the exercise indicated a fair beginning
with opportunities for significant improvement. Following Mettetal’s (2001) rubric for
assessing classroom action research, an assessment of each of the steps in the classroom
action research framework is presented here (needs improvement, on target, or exemplary),
along with a brief explanation of the reason for the assessment provided.
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Table 1: Assessment of Classroom Action Research after First Administration
Needs Improvement
On Target
Goals
Information
Exemplary
Clearly stated, fit
well with learning
and teaching and
guide action
Little relevant wineaccounting literature
was available.
Methods
Knowledge of
accounting and
wine-specific
accounting was
connected with the
industry experts.
Results
Communication of
results was done
through spreadsheet
presentation.
Reflection
Reflection of
teaching, learning
and industryconnections served
to improve the
following year’s
exercise.
Presentation
The instructor wrote
a paper about this
experience and
presented it at an
academic
conference.
4.2. Summary of Improvements Made to the Exercise after Its First Administration
As a result of the above assessment, the second administration of the exercise included: a
field-trip to a local winery, more spreadsheet instruction prior to the start of the project, a
longer forecast period (from five years to seven) and cash flow statements. Whereas some
students from the first administration of the class had suggested more specific instructions
the instructor actually chose to provide fewer specific instructions during the second
administration of the exercise. This deliberate choice resulted from a desire to treat the
students as equals and set the authoritative instructor/student relationship aside for the
purposes of the client-facing case exercise.
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4.3. Second Administration of the Case Exercise
The second administration of the case exercise took place during the spring semester of 2015.
At that time, the case was called the “It’s Accrual World” exercise.
4.3.1. INSIGHTS FROM STUDENT EVALUATIONS
Student evaluations from the second administration of the case exercise indicated again that
students had gained industry-relevant accounting knowledge and skills in the areas of: the
integration of financial and cost accounting, real-world accounting experience, and
understanding winery operations and finances. Students also noted:
1. The field trip to a local winery helped the students obtain a deeper hands-on knowledge of
the wineries and winery accounting
2. Their confidence in client-contact, spreadsheet work and book-to-real-world knowledge
had been enhanced
The students also indicated improvement of future projects should include:
1. Even more spreadsheet instruction prior to the start of the project
2. Improved structure for presentation and discussion with winery experts
4.3.2. INSIGHTS FROM INDUSTRY PROFESSIONALS
Feedback from industry professionals who participated in the second administration of the
exercise indicated:
1. The exercise produced realistic financial projections
2. The exercise engaged the industry professionals into self-reflection of their business
practices and a greater curiosity towards, and appreciation of, accounting
3. The knowledge students gained is expected to produce value for the local wine industry
Industry professionals’ suggestions for improvement included:
1. Use a fictitious winery that wishes to add additional types of wine (SKUs) at particular
price-points; build a spreadsheet model that facilitates this.
2. Use a fictitious winery that grows its own (estate) grapes (the first two administrations of
the exercise were for wineries that only bought grapes).
3. Conclude the exercise with a higher level of analysis; for example, do an in-depth
conceptual analysis of the relationships between how each type (SKU) of wine production
and sales drives significant costs.
4.3.3. INSIGHTS FROM INSTRUCTOR REFLECTIONS
Instructor reflections after the second administration of the exercise indicated substantial
improvements over the first administration with continued room for improvement.
Learning objectives were successfully achieved and the instructor agreed with the students’
observations that both “soft” skills (Boyce, Williams, et al, 2001) (such as listening,
diagnosis, and oral communication) had improved as a result of the exercise, and that there
had been a substantial improvement in technical spreadsheet skills through the iterative
process of spreadsheet building required in the case.
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Table 2: Assessment of Classroom Action Research after Second Administration
Needs Improvement
On Target
Goals
Background
Information
Clearly stated, fit
well with learning
and teaching and
guide action
Improved
information sources
were available
Methods
A higher quality of
analysis was done.
Results
Communication of
results was done
through spreadsheet
presentation.
Reflection
Reflection of
teaching, learning
and industryconnections
improved the second
year’s exercise.
Presentation
Exemplary
This paper attempts
to present this work
and these results
with a wider
audience.
5. SUMMARY AND IMPLICATIONS
This project was designed to be a collaborative effort between an educational institution
and the local wine industry, with the goal of advancing knowledge in wine accounting.
The case exercise was a realistic vehicle for engaging students in the study of wine
accounting as part of their cost accounting course. Learning from this project extended
across the student, faculty, and winery professionals, and served to strengthen ties
between the college and the local wine community. A bonus of the project for students
was a considerable increase in both technical skills in accounting and in “soft skill”
competencies.
Limitations of this study include a lack of quantitative assessment (e.g., pre-post) on
wine accounting-related knowledge among students, faculty and wine professionals.
In future administrations of the exercise, such a design will be useful to consider.
Overall, we believe this project demonstrates one creative way to conduct wine research
that matters: collaborative action research that supports educational goals while benefiting
the wine industry in an underexplored area of inquiry (wine accounting). We share our
experience with this project in the spirit of Zalan and Lewis (2014), who advocated for
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collaborative efforts among members of the scholarly community not only in research, but
also in the area of wine-related education.
REFERENCES
Adelman, C. (1993), “Kurt Lewin and the origins of action research”, Educational
Action Research, Vol. 1, No. 1, pp. 7-24.
Boyce, G., Williams, S., Kelly, A. and Yee, H. (2001), “Fostering deep and elaborative
learning and generic (soft) skill development: The strategic use of case studies in
accounting education”, Accounting Education, Vol. 10 No. 1, pp. 37-60.
Cropsey, G and Peters, A. (1982), Accounting Series for the Wine Industry:
Financial Planning and Preparation for a New Winery. DeLuna Press, San
Francisco, CA
Dal Poggetto, J., (1985), A Practical Guide to Winery Cost Accounting, Touche Ross,
Santa Rosa, CA
Hall, L. and Paris, R. (2001), Wines of the Pacific Northwest: A Contemporary Guide to
the Wines, Regions and Producers. Mitchell Beazley, Octopus Publishing Group, London,
UK: James, E., Slater, T., and Bucknam, A. (2012), Action Research for Business,
Nonprofit, and Public Administration: A Tool for Complex Times. Sage, Thousand Oaks,
CA.
Mettetal, G. (2001), “The what, why and how of classroom action research”, The Journal
of Scholarship of Teaching and Learning, Vol. 2 No. 1, pp. 6-13.
Oregon Wine (2015), “Authentic wines honestly made”, available at:
http://oregonwine.org/discover-oregon-wine/wine/ (accessed 1 August
2015).
Reason, P. and McArdle, K. (2007), “Action research and organization development”, In
T. Cummings (Ed.) Handbook of Organization Development. Sage: Thousand Oaks, CA.
Scott, L, and Swain, E., (1997) Wine Industry Conference: Tax Update, California
Certified Public Accountants Education Foundation, Redwood City, CA
Wagner, S., Flatt, S., Byers, K. and Prow, J. (2013, June), “The Oregon wine story: A
mixed- method study of regional reputation”, paper presented at The International
Conference of the Academy of Wine Business Research, Ontario, Canada, available at:
http://academyofwinebusiness.com/?page_id=696 (accessed 1 August 2015).
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Zalan, T. and Lewis, G. (2014, June), “Wine business education in a networked world”,
paper presented at The International Conference of the Academy of Wine Business
Research, Geisenheim, Germany, available at: http://academyofwinebusiness.com/wpcontent/uploads/2014/07/EDU03_Zalan_Tatiana.pdf (accessed 1 August 2015).
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An exploratory study on the productivity and efficiency of
Spanish and Italian wineries
Veronica Alampi Sottini
University of Florence, GESAAF, UniCeSV Italy
[email protected]
Ricardo Sellers Rubio
Universidad de Alicante, Departamento de Marketing, Spain
[email protected]
Silvio Menghini
University of Florence, GESAAF, UniCeSV, Italy
[email protected]
Abstract:
Purpose: The objective of the paper is to estimate the total change in productivity, broken
down into efficiency change and technical change, comparing Italian and Spanish winery
sectors.
Design/methodology/approach: The methodology is based on the estimation of the
Malmquist productivity index for a sample of Spanish and Italian wineries between 2005
and 2013.
Findings: The results show very low efficiency levels for the wineries under study: Spanish
and Italian wineries show a decrease in their average annual productivity for the period
analysed.
Practical implications: The success of these wineries is underpinned on taking actions based
on the results of the efficiency and productivity analysis. These results will guide the
wineries to improve their competitiveness in the global market.
Keywords: Wineries, Productivity, Efficiency, Malmquist index
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1. INTRODUCTION
Growing competitiveness among wineries and the globalisation of the wine market have
given rise to an economic environment in which it is becoming increasingly difficult for
companies to survive. The new wine-producing countries (e.g. Australia, Chile and the USA),
which use modern production techniques and up-to-date marketing strategies, has stimulated
those of the old world, Spain and Italy included, strengthening their efforts to compete in the
international market. Efficiency and productivity analysis has become an important issue for
winery managers, as it plays an important role in the management of wineries, providing vital
information for a number of tactical, strategic, and policy related decisions. However,
increasing productivity in the wine sector can be difficult due to the characteristics of the
sector. The heterogeneous nature of the products obtained (most wineries produce different
wines that are sold at different price levels) makes difficult the estimation of efficiency and
productivity to inform decision making as the analysis results could be different from product
to product.
The paper estimates the productivity and efficiency of Italian and Spanish wineries, with the
hypothesis that these countries are far from reaching their potential levels of efficiency and
productivity, due to structural problems and/or lack of managerial skills. To verify the
performance of the wineries, the paper will try to answer the following questions:
-
What is the actual level of efficiency and productivity among Spanish and Italian
wineries? How did it change in the period 2005-2013? Is Italy performing better than
Spain or vice versa?
- What are the causes of the inefficiencies, if this is the case, among the wineries? How
can the wineries improve their performance?
To answer these questions, the research methodology measures productivity change using
Malmquist productivity indexes computed via non-parametric techniques. Productivity
change is broken down into two terms: efficiency change and technical change. The first
reflects the ability of a firm to obtain the maximum level of output from a fixed level of
input, given the available technology. The second reflects movement of efficiency that could
be attributed to innovation or technological change. The empirical analysis is carried out on a
sample of Spanish and Italian wineries between 2005 and 2013.
From a methodological perspective, the definition of inputs and outputs is one of the main
problems faced when estimating efficiency in the wine industry. When comparing the
performance of wine producers it is possible to consider a technical perspective (technical
concept of efficiency), analysing the ability of the wine producer to transform some inputs
into wine outputs volume (e.g. litres of wine) or analysing the ability to transform some
inputs into wine outputs value (e.g. sales) (economic concept of efficiency).
Most of the authors consider the technical approach (e.g. Townsend et al., 1998; Bonfiglio,
2006; Vidal et al, 2013; Aparicio et al, 2013). While Townsend et al. (1998) estimate partial
and total productivity for a sample of wine grape producers located in South Africa analysing
the effect of size. The results show that the inverse relationship between farm size and
productivity is weak, not consistently negative and differs among regions. Bonfiglio (2006)
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analyses efficiency and productivity changes of a sample of Italian agrifood cooperatives in
the period 2000-2002. Results show that wine cooperatives present the lowest average levels
of efficiency. Moreover, their productivity decreased due to a worsening of managerial
capabilities. Vidal et al. (2013) analyse the efficiency of a sample of Spanish PDOs between
2008 and 2010 with the non-parametric technique of Data Envelopment Analysis (DEA),
BAM and Malmquist indexes. The results show that the efficiency of the subset of Spanish
PDOs is uniform over the time periods analysed and that productivity experiments highlight
only minor and irrelevant changes. Aparicio et al. (2013) analyse the revenue, technical and
allocative inefficiency of a sample of Spanish PDOs with an output oriented version of the
weighted additive DEA model. Overall, the results show that technical inefficiency is clearly
greater than the allocative one. The results also showed that revenue efficiency was the
greater in the case of PDOs with specific wine products serving niche markets and without
clear competition. Although results are not directly comparable, most of the academic papers
show low levels of efficiency in the winery sector (e.g. Bonfiglio, 2006; Liu and Lv, 2019;),
which could suggest that wineries could improve under the right conditions. From a dynamic
perspective, results are not consistent. While some papers evidence a slight decrease of
productivity over time (e.g. Bonfiglio, 2006; Vidal et al., 2010), others (e.g. Liu and Lv,
2010) evidence a slight increase.
On the other hand, several authors adopt the economic efficiency approach (e.g. Barros and
Santos, 2008; Fernandez and Morala, 2009; Fekete et al., 2009;), evidencing also low levels
of economic efficiency. Barros and Santos (2007) compare the efficiency of cooperatives and
private enterprises in the Portuguese wine industry showing that cooperatives, on average, are
more efficient than their private counterparts. Fernandez and Morala (2009) study the cost
efficiency of wine firms in Spain, verifying improvements in global efficiency as well as pure
technical efficiency of the analysed firms. Fekete et al. (2009) use the Malmquist index to
examine productivity in the agriculture of new EU member states.
Finally, at a country level, Tóth and Gál (2014) and Fleming et al. (2014) evidence that New
World countries are more efficient than traditional countries and that inefficiency is related to
some macroeconomic factors such as the development of the financial system, the quality of
human capital and per capita wine consumption.
The existing literature shows that several authors have made the effort to analyse efficiency
(economic or technical approach) in the wine industry, implementing different
methodologies. However, there is a gap in the research of efficiency in the Italian wine
sector, since Bonfiglio (2006) focused on the agrifood cooperatives in general, for the period
2000-2002. Literature research highlights that only broad comparisons among wine
producing countries have been made (Old World vs. New World, Tóth and Gál (2014) and
Fleming et al. (2014)). This paper is an attempt to fill this gap, focusing on specific countries,
such as Italy and Spain. The paper provides a fact based analysis of the actual level of
efficiency of Italy and Spain. Lastly, the paper will try to point out those factors and
strategies that lead to a higher level of efficiency.
3. METHODOLGY, SAMPLE AND VARIABLES
3.1 Methodolgy
The Malmquist index, estimated using distance functions, allows changes in productivity to
be broken down into technical change and efficiency changes (Caves et al.1982). Technical
change reflects the frontier shift over time while the efficiency change represents deviations
from the best practice frontier. In simpler terms, the Malmquist index is defined as the
product of the “catching-up” and the “frontier shift” terms. The “catching-up” term relates to
98 | P a g e
the extent by which a winery improves its efficiency, while the “frontier-shift” term reflects
the change in the efficiency frontier of the winery between the two periods of time.
The Malmquist index based on outputs uses output distance functions defined on the output
set, P(x) = {y : x can produce y}, as (Farrell, 1957):
Dt ( y, x)  min { : ( y /  )  P( x)}
(1)
and it analyses productivity changes as the differences at the maximum level of output that
can be attained from a fixed level of inputs. The formulation of this approach taking the
technology of the period t as reference according to Caves et al. (1982) is the following:
Dt ( y t 1 , xt 1 )
Dt ( y t , xt )
(2)
Alternatively, the Malmquist index can be estimated in the reference period t+1 as:
Dt 1 ( y t 1 , xt 1 )
Dt 1 ( y t , xt )
(3)
Since the choice of period t or t+1 is arbitrary, Färe et al. (1994) defined the Malmquist index
as the geometric mean of the two indices above:
 Dt ( y t 1 , xt 1 ) Dt 1 ( y t 1 , xt 1 ) 
M t ,t 1 ( y , x , y , x )  

t
t
t
t 1
t
t
 D (y , x ) D (y , x ) 
t 1
t 1
t
t
1
2
(4)
A value of M greater than one will indicate productivity growth from period t to period t+1,
while a value less than one indicates a productivity decline. Operating and reordering the
terms of the equation (4), the decomposition of productivity change into efficiency change
(catching-up, CU) and technical progress (technical change, TC) is the following:
(5)
Thus, the productivity changes reflected in the index will be a mixture of efficiency changes
(CU) and frontier shifts (TC). The first ratio (CU) is the index of efficiency change (i.e.
whether the firm has moved closer or farther from the frontier over time), the second (TC) is
the index of technical change between the two periods evaluated as a result of frontier
displacement both between years t and t+1. A value of the CU ratio or TU ratio greater than
one indicates productivity growth as a consequence of an efficiency improvement or a
frontier shift (technical progress) respectively between period t and period t+1. A value of the
CU ratio less than one indicates efficiency decline.
As it is not possible to observe the real set of production possibilities, the indexes which
describe productivity, efficiency, and technology changes, as well as the distance function
99 | P a g e
must be estimated. Particularly, we have considered a DEA model (Färe et al., 1994) to
measure the distance functions. In addition, some environmental variables have been
included as non-discretionary inputs (Ferrier and Lovell, 1990), as they are out of the control
of wineries’ managers. In order to establish a cross-country comparison, a common frontier
has been estimated.
3.2 Contextual setting, sample and variables
Spain and Italy are two of the world’s leading wine producers and the wine industry is a
relevant economic sector in terms of added value it generates, number of people employed
and for the country balance of trade (Table 1). However, a significant drop in domestic
consumption, which caused a significant imbalance between internal supply and demand,
offsets these positive aspects. Export growth and new market entry are key requirements to
ensure the viability of the sector.
Table 1 Main characteristics of the Spanish and Italian wine sectors.
Spain (2013)
Italy (source ISTAT, 2010)
Vineyard surface area (ha)
950,639
664,296
Wine production (millions hl)
42.7
44.90
Wine exports (millions hl)
18.47
20.32
Wine consumption (millions hl)
9.10
21.79
Wine consumption (litres per capita)
19
38
Number of wineries
4,500 (approx.)
31,875
The methodology proposed is based on samples of Spanish and Italian wineries between
2005 and 2013. The Spanish sample is obtained from the SABI database (which provides
accounting information on Spanish companies). The initial sample is comprised of 2,563
firms. The Italian sample is obtained from the AIDA database (which provides accounting
information on Italian companies). The initial sample is comprised of 1,196 Italian wineries,
after exclusions to remove outliers and reduce the number of infeasibilities of the Malmquist
index, the final sample is comprised of 622 Spanish and 609 Italian wineries. The Spanish
and Italian final sample represents 57.22% and 55.65% of total wineries’ revenue for 2013,
respectively.
The total factor productivity is estimated using three inputs and two outputs. The consistency
of the variables is guaranteed even when using two different databases, because both store
published accounting data that is highly harmonized across countries in the European
Community. This paper uses two monetary outputs:
i) sales revenue of each winery, because the wineries work with multiple wines that are sold
at different prices. The availability of non-aggregated information on outputs produced is
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usually not available for large samples;
ii) profit of the winery, since: a) wineries can obtain atypical income apart from their main
activity, which is not included in their sales volume figures; b) apart from sales volume,
winery managers pay special attention to results as they guarantee the viability of the
company as well as future investments; and c) considering the profits allows for inclusion
of the influence of other types of costs not considered as inputs.
With regard to inputs, three controllable productive factors are used: i) number of
employees, as the representative input of the labour factor. We have considered the number
of full time equivalent employees as the number of employees in the winery can vary during
the year; ii) equity level of the winery (capital plus reserves); and iii) level of debt (short and
long-term debt). The two latter variables are used instead of a single capital variable because
access to financing and its costs is a fundamental dimension of international competition in
the wine industry (Viviani, 2008).
To account for differences in the environmental conditions between the two countries, four
variables are considered: i) gross domestic product; and ii) employment rate (both related to
the economic environment); ii) volume of wine production, which considers to a certain
extent factors related to climate; and iii) domestic wine consumption (both contextual setting
variables related to the wine sector). We included environmental variables directly into the
DEA linear program formulation as non-discretionary inputs (Ferrier and Lovell, 1990). The
values of the environmental variables are different for each country but take equal values for
each winery in each country by year.
Finally, given the temporal field of the study, all the monetary variables are deflated and
expressed in thousands of Euros of the year 2005. The conversion to constant Euros is
performed through the implicit deflator of GNP for each country.
4. RESULTS
The non-parametric DEA methodology has been applied for the estimate of the wineries’
efficiency. A common frontier has been estimated (Table 2) in order to establish a crosscountry comparison. The basic assumption is that the production technology substantially
doesn’t differ between Spanish and Italian wineries, since the structure and characteristics of
the industry in these two countries is very similar. For the period under analysis, the results
show low levels of efficiency for the Spanish and Italian wineries. The average efficiency of
the analysed wineries between 2005 and 2013 is 0.348, indicative of a high degree of
inefficiency in the wine industry. On average the wineries could have achieved the same
levels of outputs using 65.2% fewer resources (Table 2). The analysis results show that the
efficiency of the Spanish wineries (0.343) is lower than the Italian wineries (0.354).
According to the Kolmogorov–Smirnov (K–S) test this difference is significant. This result
implies that Spanish wineries need a bigger amount of inputs to obtain the same level of
outputs than the Italian wineries or, alternatively, that the Italian wineries are able to obtain a
higher level of outputs than the Spanish wineries with the same level of inputs. This result
confirms the idea that Italian wineries are able to value the wine in the market to a higher
extent than Spanish wineries. Regarding the evolution of the efficiency for the period
analysed, Table 2 shows that the efficiency declines after 2010 in both countries.
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Table 2 Economic efficiency of wineries
Economic Efficiency
Global
Spain
Italy
2005
0.381
0.375
0.382
2006
0.371
0.357
0.385
2007
0.366
0.366
0.366
2008
0.339
0.333
0.344
2009
0.341
0.333
0.350
2010
0.367
0.355
0.380
2011
0.351
0.354
0.348
2012
0.297
0.303
0.291
2013
0.321
0.307
0.336
2005-2013
0.348
0.343
0.354
To estimate the Malmquist productivity index the Färe et al. (1994) proposal has been
employed. The results obtained are shown in Table 3.
Table 3 Productivity change: technical change and efficiency change
Malmquist Index
Technical change
Efficiency change
(MI)
(TC)
(CU)
Global Spain
Italy
Global Spain
Italy
Global Spain
Italy
2005-2006
1.018
1.018
1.018
1.040
1.068
1.012
0.981
0.953
1.011
2006-2007
1.041
1.050
1.032
1.048
1.017
1.081
0.993
1.033
0.954
2007-2008
0.942
0.947
0.936
1.041
1.054
1.028
0.904
0.898
0.911
2008-2009
0.918
0.910
0.927
0.922
0.921
0.923
0.996
0.988
1.004
2009-2010
1.010
1.022
0.997
0.920
0.940
0.901
1.097
1.088
1.107
2010-2011
1.024
1.042
1.006
1.118
1.087
1.150
0.916
0.958
0.875
2011-2012
1.019
1.025
1.013
1.272
1.252
1.294
0.801
0.819
0.783
2012-2013
1.022
0.995
1.050
0.930
0.965
0.895
1.099
1.031
1.173
Geometric Mean
0.998
1.000
0.997
1.031
1.033
1.028
0.969
0.967
0.969
102 | P a g e
The results suggest that in the period 2005–2013, the Spanish and Italian wineries have
experienced an annual productivity change of -0.02%, which is explained by the confluence
of two factors acting with contrary signs: the 3.1% improvement as a consequence of frontier
shift, which is interpreted as technical change (TC), and the 3.12% negative catching up (CU)
effect. The technical progress (3.1%) means that, over time, firms on the frontier use a lower
amount of inputs to produce the same outputs. The negative catching up effect (–3.12%)
implies that the efficiency of the wineries decreases over the period of time analysed. This
pattern is very similar in both countries. For the Spanish sample, the results show that the
annual average productivity is constant for the global period considered, which is explained
by the confluence of two factors acting with contrary signs, the 3.3% improvement as a
consequence of frontier shift (TC) and the 3.3% negative catching up (CU) effect. For the
Italian sample, the results show an annual average productivity decrease of 0.03%, which is
also explained by the confluence of two factors acting with contrary signs: the 2.8%
improvement as a consequence of frontier shift and the 3.1% negative catching up effect.
The results confirm the idea that the positive contribution of technological progress to
productivity growth is offset by a deterioration of the wineries’ efficiency. The widening gap
between wineries and the technological advances suggest that much of the decrease in
efficiency can be attributed to the wineries’ failure to adapt to the technological
improvements made by the leading competitors. Few wineries are innovators and shift the
frontier, while most of the other wineries fail to adapt to the technological improvements and
fall behind.
The study highlights an important decrease in productivity between 2007 and 2009. Although
it is difficult to identify the particular reasons of this decline, it should be noted that the
distillations subsidized by the Common Market Organization (CMO) budget for wine
disappeared in 2008. This was a substantial modification in the market conditions, because
many firms had to establish new business channels to sell large volumes of wine that were
previously dedicated to alcohol distillation for oral use.
5. CONCLUSIONS
Results show high levels of inefficiency in the Spanish and Italian winery sector and a slight
decrease in the average annual productivity among the firms analysed between 2005 and
2013. The results shown are aggregate for a productive system which is extremely
heterogeneous (especially in Italy). The use of mean values hides those wineries that are
innovative and efficient and equally those that are extremely inefficient. In many cases, in
both Italy and Spain, inefficiency can be interpreted as the result of a lack of knowledge
about certain critical aspects of the productive activity. Being able to measure performance is
crucial to quantify the loss of value due to poor performances in a productive activity. In
order to improve revenues, firms should be able to identify the sources of poor performance
and implement plans to make better use of their resources. Efficiency improvements may be
achieved if the inefficient firm is able to learn better production routines, develop new
processes or adopt new technologies into their production processes.
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The negative evolution of the total productivity over the period of time considered is the
consequence of two forces with contrary sign, as the positive contribution of technological
progress to productivity growth is offset by a deterioration of the wineries’ efficiency against
the technology frontier. Most of the wineries fail to adapt to the technological improvements:
managers should be aware that lack of productivity growth is a problem for their firms,
meaning that they should take the necessary measures to follow its development and make an
analysis of its determinant factors. Results also show a decline in the productivity between
2007 and 2009, when the distillations subsidized by the CMO disappeared. This fact
highlights the importance that regulators have in defining the future of the wine industry.
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and decompose revenue efficiency in the Spanish Designation of Origin wines with DEA”,
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Barros, C.P., and Santos, J. C. G. (2007), “Comparing the productive efficiency of
cooperatives and private enterprises: the Portuguese wine industry as a case study”,
Journal of Rural Cooperation, Vol. 35 No. 2, 109–122.
Bonfiglio, A., (2006), “Efficiency and productivity changes of the Italian agrifood
cooperatives: A Malmquist index analysis”, Universita’ Politecnica delle Marche.
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Caves, D.W., Christensen, L.R. and Diewert, W.E. (1982), “The economic theory of index
numbers and the measurement of input, output, and productivity”, Econometrica, Vol. 50
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Farrell, M.J. (1957), “The measurement of productive efficiency”, Journal of the Royal
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Personality Matters to Young Wine Consumers
Nathalie Spielmann
[email protected]
Barry J. Babin
Louisiana Tech University, USA
[email protected]
Caroline Verghote
Communication Officer Canal+, France
[email protected]
Abstract:
Purpose: This paper proposes a personality-based approach to measure Millennials
consumers’ wine evaluations. Past personality-based measures (brand personality, country
personality, product personality) each present their own issues when it comes to measuring
wine perceptions, especially of neophyte wine consumers. We propose a new, holistic,
adapted measure to gauge the personality dimensions Millennials perceive in wine.
Design/methodology/approach: Past items from personality scales were regrouped and
reduced. An initial exploratory factor analysis was conducted, followed by a confirmatory
factor analysis across wines from different regions. Predictive validity tests relating the
dimensions of wine personality to key consumer outcomes were also conducted.
Findings: Our results suggest two dimensions of wine personality for Millennial consumers:
a social and a philosophical dimension. The nine-trait structure is stable across origins and
each dimension can be related to quality and value perceptions, attitudes, and purchase
intent. The findings result in a new tool for managers to gauge their reception by Millennial
wine consumers.
Keywords: Wine, personality, confirmatory factor analysis, Millennial consumers
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1. INTRODUCTION
Young wine consumers have been the focus of numerous studies, and for good reason
– they are the consumers of tomorrow. And for a while now, Millennials have attracted the
attention of academics. Extant research focuses on segmenting young wine drinkers (Thach
and Olsen, 2006) and even the motivations of Millennials for becoming involved in wine
related activities, such as tasting rooms and festivals (Bruwer et al. 2012). Recent research
has focused on risk perceptions and information search when it comes to wine purchases, as
well as identifying key product features coveted by Millennials, such as medals won, labels,
and alcohol content (Atkin and Thach, 2012). Overall, research demonstrates that while
young consumers may all have been born during the same time period, their consumption
habits tend to be rather heterogeneous (Magistris et al. 2011; Thach and Olsen, 2006).
This article proposes to use a personality-based approach in order to better understand
and uncover the evaluative dimensions that young wine consumers use for wines. In
consequence, we empirically propose, test, and validate a personality measure for wines,
adapted for Millennials.
2.1. Important Dimensions of Wine Consumption for Young Consumers
From this point on, we will refer to Millennials as consumers born between 1977 and
1997. Our examination of the available literature regarding this age cohort suggests that there
are two important evaluative dimensions for Millennials when it comes to wine. First, other
than being a lifestyle product for Millennials, wine is a social product for these consumers,
representative of conviviality and company (Agnoli et al. 2011; Ritchie, 2011; Teagle et al.
2010; Thach and Olsen, 2006). Millennials like to consume wines with others because it
allows them to share the wines they are drinking (Ritchie, 2011) and it is also a product that
demonstrates their social and cultural capital (Richard K. Miller and Associates, 2011).
Second, wine represents an experience product that Millennials can become highly involved
with, because as a cohort, Millennials are very meticulous and concerned about their
purchases (Richard K. Miller and Associates, 2011). Millennials, albeit their limited
experience, can clearly evaluate wines using specific features including the origin, the
vintage, the label, the brand name, and the grape variety (Magistris et al. 2011). Millennials
also evaluate wines based on their value propositions, be they economical, environmental,
and even experiential (Thach and Olsen, 2006). The aforementioned results suggest that
Millennials not only have an attraction to the wine lifestyle, but they are willing to be
involved with the product. This involvement translates into active participation in wine
related activities, and these not just for the consumption of wine but also for their affective,
experiential, and educational value (Bruwer et al. 2012).
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2.2. Personality-Based Measures
Consumers make consumption choices that are congruent with their self-concept
(Malhotra, 1988). The purpose of personality scales is to measure objects using terminology
that represents the self-concept for the consumer (Malhotra, 1981). Objects whose personality
traits are congruent with those of a consumer are expected to benefit from more positive
marketing outcomes. Most personality-based measures used in marketing were been adapted
from the psychology field, in particular from the Big Five Personality Dimensions (Goldberg,
1990). Malhotra (1981) first proposed a one-dimensional measure for product personality,
followed by the brand personality scale (Aaker, 1997), the personalities of products (Jordan,
2002), the country personality scale (d’Astous and Boujbel, 2007), and the product
personality scale (Mugge et al. 2009). The scales tend to be highly variable in terms of the
number of dimensions and traits they contain: from one-dimension (Malhotra, 1981, Mugge
et al. 2009) to six dimensions (d’Astous and Boujbel, 2007) and from 15 items (Malhotra,
1981) to 42 items (Aaker, 1997).
The existing personality scales used in marketing research present certain issues when
it comes to measuring wine personality, specifically for Millennials. The first issue is that
certain dimensions of established personality scales have been shown to be more applicable
to specific product categories versus others and not to origin products (Heslop et al. 2010;
Maehle et al. (2011). Second, the product personality scale (Mugge et al. 2009) seeks to
measure the physical evaluation of products. However, wine consists not only of extrinsic
features but also contains experiential, intrinsic features (Spielmann, 2015). Third, the
country personality scale (d’Astous and Boujbel, 2007) measures the perceptions of nations,
and not necessarily of products from a nation. Finally, most of the wine research has focused
how Aaker’s (1997) brand personality scale applies to wine label design (Boudreaux and
Palmer, 2007; Elliot and Barth, 2012), holistic package design (Orth and Malkewitz, 2008)
without developing a new scale adapted exclusively to wine as a branded product as
perceived by Millenials.
Wine is a branded experiential origin product. As such, this research seeks to develop
an adapted personality-based measure to gauge the evaluations of Millennial wine consumers.
By combining product, brand, and country personality scales and testing these with young
consumers, we propose to establish an adapted measure that wine firms and marketers can
use to evaluate the perceptions Millennial consumers have of their products on the market.
3. METHODS
3.1. Pretest and Exploratory Factor Analysis
As per the literature on personality traits in marketing, all items in previously devised
scales (Aaker, 1997; d’Astous and Boujbel, 2007; Jordan, 2002; Mugge et al. 2009) were
compiled, resulting in 153 traits. Repeated traits were removed. As posited by Boudreaux and
Palmer (2007), traits that could not be applied to wine or have previously been contested as
inappropriate for personality measurement (e.g. those in the ruggedness dimension such as
Western) were also removed, which resulted in 59 traits. This list of traits was presented to a
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panel of French students from a business school in November 2014. Respondents were asked
to state (on a seven-point Likert scale, where 1 represented not at all and 7 represented very
much so) how much they felt this trait could be applied to wine. A total of 333 completed
surveys were returned and removing those who were not in the Millennial age cohort as well
as non-consumers of wine resulted in a final tally of 318 respondents. Women represented
62% of the sample. At the end of the survey, respondents were also asked to describe in their
own words the differences between New and Old World wines and to give some origin
examples of each.
An exploratory factor analysis consisting of multiple iterations to remove poorly
performing items (e.g., those that loaded on more than one factor or those that had low, below
0.40 factor loadings) finally revealed a five dimensional structure containing 19 traits with a
total variance explained of 62.93%. The final structure was tested and revealed as stable
between genders. Table 1 presents the initial wine personality structure.
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Table 1: Initial Wine Personality Dimensions
Dimensions
Mannered Pleasant Styled Gendered Negative
Convivial
.678
Merry
.757
Open
.655
Intellectual
.719
Laid-back
.602
Realistic
.737
Sincere
.716
Spiritual
.656
Sentimental
.740
Agreeable
.808
Interesting
.799
Original
.700
Modest
.726
Neutral
.693
Robust
.757
Feminine
.867
Masculine
.883
Immoral
.885
Absurd
.812
3.2. Confirmatory Factor Analyses and Multi-group Comparisons
In order to refine the structure and to uncover the personality structure as applied to
different wines from different origins, another study was conducted. A bottle of wine was
selected and a fake label was created upon which was only varied the origin: Mexico, France,
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and Armenia. While Mexico represented a New World wine, as per the open-ended question
in the pre-test, France represented the Old World wine, and Armenia, which was never
mentioned, was used as a stimulus to represent a wine from an unknown origin. Each
respondent viewed only one of the wine bottles and then answered how well they felt the 19
personality traits represented the wine, on a Likert scale of 1 (not at all) to 7 (very much).
Respondents then answered questions relating to their quality perceptions (as per Sprott and
Shimp, 2004), attitude toward the wine (using the measure by Lepkowska-White et al. 2003),
value perceptions (using the measure by Raghubir and Srivastva, 2002) and their purchase
intention (adapted from Voss et al. 2003). Respondents were asked to answer the
CETSCALE (by Shimp and Sharma, 1987) in order to gauge their level of ethnocentrism.
The survey ended with socio-demographic questions.
The online survey was sent out to French students in February 2015. A total of 236
surveys were completed. All respondents were French nationals and all were wine
consumers. Men represented 36% of the sample, and all respondents were between the ages
of 20 and 35. There were no significant differences between the groups (Mexico, France,
Armenia) in terms of the level of ethnocentrism of the respondents (F (2,233)=.113, p>.05).
After a series of preliminary factor analyses suggesting two factors as the only
dimensionality that would yield dimensions that are comprehensible and include at least three
items per factor, we conducted multigroup confirmatory factor analysis to address the
measurement structure across the three wine origins. Table 2 displays the factor structure
imposed on the covariance matrices for the Mexican, French and Armenian wines,
respectively. The two dimensions have been named social and philosophical. Measurement
invariance involves a series of CFA models that impose varying levels of constraints on the
covariance structures. Metric invariance exists if the evidence suggests that both the same
factor pattern (configural invariance) and the same factor loadings exist across groups.
The first CFA model tests the configural structure suggested in Table 2 across
samples. The model is considered “totally free” in the sense that each factor loading is free to
take on its specific estimated value in each sample. The totally free, three-group CFA yields
a χ2 of 150.5 with 78 degrees of freedom (df) (p < 0.01), which equates to a Comparative Fit
Index (CFI) of 0.936 and a Root Mean Squared Residual (RMSEA) of 0.110. Although the
goodness of fit indicators are within range of those associated with good fit, the RMSEA is
slightly high for a model of this size and complexity (Hair et al. 2006).
Table 2 also displays the completely standardized factor loading estimates produced
for each group. The loadings provide input useful to compute other diagnostic indicators of
construct validity. In this case, the construct reliability estimates all are above 0.68,
suggesting good reliability. In addition, the average variance extracted (AVE) estimates are at
or above 0.5 for Factor 2 in the French and Mexican samples, but below 0.5 for Armenian
sample (0.35). Additionally, the AVE is just below 0.5 for the first factor for the Mexican and
French wines, but above 0.5 for the Armenian sample. Thus, the construct reliability
estimates provide evidence of construct validity although several AVEs fall below the 0.5
rule of thumb (Hair et al. 2006).
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Table 2: Standardized Factor Loading Estimates Per Group
Mexico
France
Armenia
Social Philosophical Social Philosophical Social Philosophical
Merry
0.79
0.79
0.79
Laid-back
0.77
0.55
0.76
Original
0.52
0.68
0.71
Open
0.60
0.73
0.59
Convivial
0.61
0.34
0.80
Spiritual
0.62
0.62
0.62
Intellectual
0.85
0.74
0.65
Interesting
0.63
0.84
0.60
Sincere
0.89
0.56
0.47
Variance
Extracted
44.4%
57.4%
40.8%
48.8%
53.9%
34.7%
Construct
Reliability
0.80
0.84
0.76
0.79
0.85
0.68
Discriminant validity exists clearly in both the Mexican wine and Armenian wine
samples. The corrected correlation estimate (PHI) between dimensions are 0.59 and 0.57 in
the Mexican and Armenian conditions, respectively. In both cases, the AVE between
dimensions exceeds the square of PHI coefficient (0.35 and 0.33 compared to the lowest
AVE of 0.347). In the French wine sample, the correlation estimate between factors is 0.84,
which squared, exceeds the AVE estimates for the two factors. However, compressing the
two factors into one yields a significantly worse fit (change in χ2 = 41, 1 df, p < .01),
suggesting some evidence of discriminant validity.
Examining metric invariance can test the question of whether or not the factor
structure of brand personality changes based on a product’s country of origin. Consequently,
a multigroup model examines metric invariance by comparing the TF CFA result to that of a
CFA constraining the loadings to be equal across all groups (i.e., factor structure invariance).
The CFA model with the equality constraints added yields a χ2 of 169.4 with 92 df (p < 0.01),
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which equates to a CFI of 0.931 and a RMSEA of 0.110. The difference in χ2 of 18.9 with 14
df is not significant (p = 0.83). Thus, adding the equality constraints does not significantly
diminish the fit of the CFA, suggesting metric invariance.
3.3. Predictive validity
Correlations between each dimensions and key wine marketing outcomes (quality
perceptions, attitudes, value perceptions, purchase intention) are presented in Table 3. We
note that the correlations are almost always significant and positive. For the Mexican wine,
our New World option, both dimensions are positively and significantly related to marketing
outcomes. For the French wine, the Old World example, the social dimension does not
correlate significantly with either quality or value perceptions. However the philosophical
dimension correlates quite strongly for all marketing outcomes. For the Armenian wine, the
social dimension does not have an influence on perceptions of value but positively influences
all other perceptions. The highest correlations are between the philosophical dimension and
attitude toward the product as well as quality perceptions.
Table 3: Correlations with key wine marketing outcomes
Mexico
France
Armenia
Quality
Attitude
Social
.204*
.347**
.347**
.279**
Philosophical
.394**
.375**
.342**
.336**
.252
.381**
.158
.367**
Philosophical
.481**
.610**
.331**
.454**
Social
.258*
.308**
.176
.240*
Philosophical
.635**
.611**
.270*
.532**
Social
Value
Purchase Intent
* significant p<.05 ** significant p<.01
The results of this research demonstrate the appropriateness of a personality measure
adapted to Millennial wine consumers. The nine-trait, two-dimensional structure that
emerged from our research is not only discriminately valid from other personality scales
developed in marketing, but it also has predictive validity. The two dimensions of the wine
personality scale fit the preoccupations of Millennials with regards to wine: the social
function of the product, and the philosophical aspect of wine. It has previously been outlined
that young wine drinkers prefer to consume wines in social settings and for pleasure (Ritchie,
2011). This research confirms that when Millennials evaluate wines, they consider how
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congruent it is with their desire to be social. Likewise, research has previously demonstrated
that albeit new to wine drinking culture, Millennials are active and involved wine drinkers,
seeking numerous value propositions (Bruwer et al. 2012). Our scale suggests that the
philosophical, experiential, and intellectual values of a wine are very important to the
Millennial consumer. It should nonetheless be noted that wine quality and value perceptions
as well as attitudes and purchase intentions can be influenced by a multitude of variables and
that wine personality is one of many factors used in the evaluation of wines by Millenials.
While it can be argued that the scale does not contain a lot of personality traits, less
than in the extant scales, the traits that remain are clearly highly relevant for Millennials. It
should be noted that the scale attempts to measure a very specific product category, and for
an age cohort that although interested in the product category, does not have extensive
experience with it (Melo et al. 2010) – this therefore limits in a way their ability to describe
the personality associated to wine, explaining the nine traits retained versus more in other
personality scales. Finally, the scale was developed using already parsimonious scales. Our
scale, which is adapted to the consumer segment and to the product, contains the most
parsimonious structure possible. As well, the student sample used in our studies represent a
part but not all of those within the Millenial cohort (e.g., those who work). Future research
should include these Millenials. As well, additional research on real (versus the fictitious
ones used in the research) bottles of wine would incorporate the impact of product packaging
in wine personality assessments.
Wine marketers and managers can easily adopt the scale presented here in order to
gauge the perception of their products by Millennial consumers. Managers may wish to use
the scale to first have an idea of how their brands and products are positioned either by trait
or by dimension. Marketers may also use the scale to evaluate how general categories of
wines are perceived. For example, our research suggests that New World wines benefit from
boasting both a social and philosophical approach, perhaps best exemplified in slogans
similar to: old-world traditional winemaking in a new world setting. Millennials seem to
demonstrate traditional expectations from Old World wines, hence why the philosophical
dimension is significantly and more strongly correlated to all marketing outcomes whereas
the social dimension is only significantly correlated to attitude and purchase intent for such
wines. Finally, if wines originate from a mostly unknown wine origin, it appears that they
might benefit more from demonstrating a philosophical personality.
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Are Dominant Wine Counsellors More Effective With Consumers?
Mirjam Holm
[email protected]
Ulrich R. Orth
[email protected]
Tatiana Bouzdine-Chameeva
KEDGE Business School Bordeaux, France
[email protected]
Jochen Wirtz
National University of Singapore
[email protected]
Abstract:
Purpose: This paper investigates how dominance exuded by wine counselors (e.g., service
personnel and sommeliers) during their personal interaction with customers influences the
effectiveness of encounters through instrumental and social outcomes.
Design/methodology/approach: A laboratory experiment with pictorial stimuli in two settings,
and a field study in special wine stores test how counselor dominance influences the
effectiveness of encounters (approach/avoidance and shopping experience) through competence
(an instrumental outcome) and warmth (a social outcome).
Findings: Study 1 shows that perceived power (positive) and likability (negative) mediate
the influence of dominance on approach-avoidance, resulting in an overall curvilinear
relationship. Study 2 shows that wine counselor dominance relates positively to competence
and warmth, resulting in an overall positive effect on shopping experience. Subjective
product knowledge moderates the dominance-competence relationship.
Practical implications: Given the relevance counselor dominance has for service outcomes,
wine marketers may be interested in benefitting from the findings by paying greater attention
to the verbal and nonverbal drivers of dominance of their frontline employees.
Keywords: Competence, dominance, nonverbal behavior, sommelier, warmth
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1. INTRODUCTION
The study of service encounters - when customers meet with frontline employees to seek and
receive counsel on what to buy - has long been concerned with the question of what
interpersonal perceptions and processes make for effective outcomes (Parasuraman et al.,
1985). Among the general ingredients critical to a counselor’s success are a broad and deep
knowledge base, effective verbal communication, listening, human relations and organization
skills (Deeter-Schmelz et al., 2008). Specifically for wine counselors (sommeliers, stewards,
restaurant waiters-servers, salespeople in shops and wineries) critical ingredients include
knowledge (Dewald, 2008), sales skills (Dodd, 1996), and service quality (O'Neill et al.,
2002). Only a relatively small body of literature has focused on the impact of primarily
nonverbal employee cues (such as dominance) on the perceptions customers form of
counselors and the impact of these perceptions on outcomes (Gabbott & Hogg 2001).
One aspect of interpersonal perception affected by subtle and non-intrusive nonverbal
behavior is the dominance dimension (see Hall et al. 2005 for a meta-analytic review).
Personality and social psychology research has associated dominance with a number of
positive outcomes including greater heterosexual attraction (Sadalla et al. 1987), managerial
success (Phan et al., 2005), status (Cheng et al., 2010) and power (Carli et al., 1995). Service
research has linked provider dominance to the belief that information conveyed by dominant
communicators is more accurate (Bashir & Rule, 2014).
This study tests the prediction that customer perceptions of a wine counselor's dominance
will substantially impact the outcome of the encounter. To date, the nature of the link
between dominance and the effectiveness of service encounters remains unclear. Focusing on
instrumental outcomes (an evaluation of dominance’s relevance to the topic at hand), one
school of thought (e.g., Littlepage et al., 1995) suggests that dominance reinforces customer
impressions of counselor power, ability, and competence, thus implying a positive, linear
relationship. Another school of thought (e.g., Dillard et al., 1997) focuses on social outcomes
(an evaluation of dominance’s contribution to the relationship) and suggests that dominance
lowers perceptions of warmth, hereby implying a negative linear relationship. We adopt an
integrative perspective, and merge both views with the literature on negativity bias
(Baumeister et al. 2001) to identify how wine counselors should deal with dominance.
2. LITERATURE AND HYPOTHESES
1.1. Dominance Effects
There is substantial support (for a review see Hall et al. 2005) for the interpersonal
perception of dominance (Dunbar & Burgoon 2005), which is rooted in nonverbal “power
codes” (Schwartz et al., 1982) and the “shared meaning” of postures (Kudoh & Matsumoto,
1985). Subtle cues such as head tilt (Mignault & Chaudhuri 2003), body posture (Schwartz
et al., 1982), head posture (Carli et al., 1995), and head and body canting (Halberstadt &
Saitta 1987) can communicate dominance. Viewers then infer impressions such as power
(Carli et al., 1995) or rank (Carney et al. 2005), and adjust their behavior (Kiesler, 1983).
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People who behave dominant rather than submissive attain more influence in groups,
because they are thought to be more competent (Littlepage et al., 1995), and possess greater
agency (Cheng et al., 2010). Even when dominance is exuded only nonverbally, people are
rated higher in task capacity, (Ridgeway, 1987) competence, and power (Carli et al., 1995).
On the downside, dominance is negatively associated with social outcomes, such as
perceived cooperativeness, helpfulness (Cheng et al., 2010), likability (Ridgeway &
Diekema, 1989), politeness (Dillard et al., 1997) and liking (Dillard et al., 1995).
1.2. Curvilinear Shape
The preceding discussion suggests that dominance relates positively to instrumental
outcomes (competence), and negatively to social ones (warmth). We expect a curvilinear
(bell-shaped) relationship between dominance and measures of effectiveness where a lack of
effectiveness with wine counselors may revolve around markedly low levels of dominance or
markedly high levels of dominance. High levels of dominance may bring instrumental
rewards as customers associate providers with power, aiding them in achieving their goals but
can be detrimental when the interpersonal relationship suffers due to a perceived lack of
warmth. In contrast, low levels of dominance may bring social rewards but can undermine
instrumental goals achievement. Thus, increasing levels of dominance may often entail a
trade-off between social deficiencies and instrumental merits, or, as Ames and Flynn (2007,
p.307) put it, "between getting along and getting one's way".
Readers may argue that the social and instrumental outcomes of dominance simply offset
each other so that all levels of dominance ultimately lead to equal outcomes, just in different
ways. In contrast, we expect that the downsides of markedly low or markedly high levels of
dominance will have a disproportionate effect on customers’ behavior. We base this
prediction on both theoretical and evidential support. Conceptual support draws from
Baumeister et al.’s (2001) ‘bad is stronger than good’ principle (see Grant & Schwartz 2011
for a review) and Rozin and Royzman’s (2001) negativity bias. Empirical support stems
from research on management in general (Pierce & Aguinis 2013), and studies on leadership
(Ames & Flynn 2007) and sales personnel (Johnson, 2014) in specifics.
Extending the evidence for people’s negativity bias suggests that the deficiencies of
markedly low or markedly high levels of dominance may overshadow the merits from the
perspective of the customer. Below a certain extent of provider dominance, instrumental
deficiencies outweigh social merits so that a provider low in dominance will primarily be
seen as incompetent or impotent rather than relationally appealing. In contrast, above a
certain extent of dominance, social deficiencies will overshadow instrumental merits, so that
a service provider perceived as high in dominance will be primarily seen as relationally
unbearable rather than instrumentally effective. Consequently, some mid-range of
dominance – levels where there are neither pronounced social nor instrumental deficiencies
– should yield the most desirable response. In other words:
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Hypothesis 1: Dominance will have a curvilinear effect on service provider effectiveness:
Service providers perceived as markedly low in dominance or markedly high in dominance
will be less effective than those perceived as moderately dominant.
Hypothesis 2: Dominance will be positively related to instrumental outcomes and will be
negatively related to social outcomes.
Hypothesis 3: Instrumental and social outcomes will mediate the effect of dominance on
provider effectiveness. This mediation will be shaped by negativity effects: At high levels of
dominance, social outcomes will account for the effects of dominance on effectiveness; at
low levels, instrumental outcomes will mediate.
3. EMPIRICAL STUDIES
3.1. Study 1
The purpose of Study 1 was to experimentally test the basic prediction that moderate levels
of a counselor’s dominance will be more effective than either low or high levels (H1). In
addition, the study explores the underlying mechanism by testing the mediating roles of
functional and social outcomes (H2 and H3).
3.1.1. Method
Study 1 employed a 2 (context: retailing vs. counseling) x 3 (dominance: low vs. moderate
vs. high) x 2 (counselor sex: female vs. male) between subjects experimental design.
Dominance was manipulated by using digital photos of a male and a female model
accompanied by a short text describing either a situation where the depicted person was an
employee of a retail store assisting in shopping or a dietician counseling on nutrition.
Our experimental manipulations generate variance in dominance (F(2,29)=25.0 p<0.001)
with scores low (M=1.95) for the low dominance condition, high for the high dominance
condition (M=3.94), and intermediate (M=2.77) for the moderate dominance condition.
The main study (N=352) employed an online questionnaire to collect data from 352
consumers. Psychometric measures assessed dominance (Mehrabian & Russel, 1974, α=0.90,
M=2.94, SD=1.06), power (Doney & Cannon, 1997, α=0.88, M=2.48, SD=1.05), likability
(Doney & Cannon, α=0.92, M=2.47, SD=1.05), and approach avoidance (Robert & John,
1982, α=0.94, M=1.88, SD=0.90). Attractiveness (Hirschman 1986, α=0.87, M=2.94,
SD=1.06) was included as a potential distorter.
3.1.2. Analyses and Results
Analysis of variance indicated a significant effect of the treatments on perceived dominance
(F(351)= 234.2, p<.001) with the stimulus selected for low dominance receiving the lowest
(M=2.12), the high dominance stimulus receiving the highest (M=4.03), and the third
stimulus receiving an intermediate score (M=2.67), as intended.
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Analysis of variance results indicated a significant effect of dominance on approachavoidance (F(328)=66.5, p<.001) with scores low for the high dominance (M=1.57) and low
dominance treatments (M=1.51) and higher for the moderately dominant treatment (M=2.58).
Post-hoc tests (Scheffè) indicated that the moderately dominant score differed significantly
(p<.05) from both the low dominance and the high dominance scores, which did not,
however, differ significantly from each other. These findings provide initial support for H1.
To test our prediction that dominance would have a curvilinear effect on counselor
effectiveness, we used regression analyses with viewer ratings of dominance to predict
approach-avoidance. Our models featured both linear and squared terms for dominance.
Obtaining a significant negative coefficient for the squared measure would be consistent with
the expected inverted-U curvilinear effect. Results of the regression models indicated the
predicted curvilinear effects as the squared dominance term on approach-avoidance had a
significant negative coefficient, with p-values at or below .01. A tertiary split of dominance
illustrated that the approach score was significantly lower for the highest level of dominance
compared with those in the middle third (M=1.71 vs. M=2.24; t(122)=-7.00, p<0.001)
although it was not significantly lower for those in the lowest third (M=1.71 vs. M=1.71;
t(122)=-0.03, p=0.98). As expected, we found that a middle range of dominance was
associated with the most favorable approach intentions.
Running both linear and curvilinear regression models to assess how dominance predicted
social and instrumental outcomes yielded a curvilinear effect of dominance on likability
(social outcome). A tertiary split on dominance clarified that providers who were perceived
as high in dominance scored significantly lower on likability than providers with moderate
levels of dominance (M=2.01 vs. M=2.81; t(128)=-10.10, p<0.001), but providers with the
lowest levels of dominance did not have score significantly different on likability than
providers with moderate levels of dominance (M=2.67 vs. M=2.81; t(109)=-1.44, p=0.15).
For power as an instrumental outcome, dominance exhibited a positive linear effect as
well as a curvilinear effect. Using a tertiary split on dominance yielded that low dominance
counselors exhibited significantly lower power scores than those moderate in dominance
(M=1.54 vs. M=2.53; t(110)=-18.16, p<0.001), whereas high dominance counselors scored
lower in power than those with moderate levels (M=3.25 vs. M=2.53; t(128)=9.81, p<0.001).
In sum, ascending from low to moderate levels of dominance yields a significant increase
in instrumental outcomes (power), whereas moving from moderate to high levels does not
yield a difference. Conversely, descending from high to moderate levels of dominance yields
a significant increase in social outcomes (likability), whereas descending further from
moderate to low levels of dominance does not yield a significant difference.
We further conducted a mediation analysis with approach-avoidance as the dependent
variable. Using OLS regression supplemented by bootstrapping (Hayes and Preacher 2010),
tested the instantaneous indirect effect of dominance on approach-avoidance through social
and instrumental outcomes. Consistent with the proposed role of social outcomes, increasing
dominance among counselors low in dominance slightly increased approach behaviors
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through the effect of the increase in dominance on likability, which in turn affects intentions.
However, an increase in dominance among providers perceived as moderate or high in
dominance lead to a reduction in approach behaviors through its effect on likability.
Consistent with the expected role of instrumental outcomes, increasing the dominance of
less dominant counselors can stimulate approach behavior through its effect on power. There
is a diminishing return, though, such that changes in dominance have a bigger effect on
approach behavior with counselors low rather than moderate or high in dominance.
To test the robustness of effects, we conducted a multiple regression analysis, predicting
approach-avoidance with five main effect terms (dominance, dominance², social outcomes,
instrumental outcomes, and attractiveness), and three interaction terms (Dominance x Social,
Dominance x Instrumental, and Dominance x Attractiveness). The results indicate a
significant positive effect of provider attractiveness on approach-avoidance (β=0.322,
p=0.014). More importantly, although attractiveness had a significant positive effect on
approach behavior (consistent with previous research), the effect of dominance remained
significant. We take this finding as evidence that the influence of non-verbal dominance is
stable across a variety of more and less attractive providers.
3.2. Study 2
The findings of Study 1 are important and significant, but could be limited by the non-winespecific context, and the study’s experimental nature. The second study aimed to mitigate
these concerns by being seated in special wine stores where there is more realism and a
greater variance in wine counselors, specifically, their dominance. The purpose of Study 2
thus was to test whether the effects of counselor dominance established in Study 1 hold in
the specific context of wine. This context-dependence is possible, perhaps even likely,
because (1) wine as a product with experience and credence attributes (Müller, 2004) may
lead customers to rely more on instrumental rather than social outcomes, and (2) previous
wine research (Lockshin and Kahrimanis, 1998) suggests that instrumental and social
outcomes of service encounters may be related/subsequent rather than independent
influencers for differentiation a wine shop. In addition to testing Hypotheses 1 through 3, the
study explores the role of customers’ subjective wine knowledge as a moderator.
3.2.1. Method
Data was obtained from 100 visitors to special wine stores in the city of Bordeaux, France.
Costumers of specialized wine shops are very focused on finding and purchasing just the
right wine and store managers rely on their staff to aid customers in their quest. As such, the
setting of Study 2 offers a robust context for (re)testing our hypotheses.
Study participants were randomly chosen from patrons of the stores over a period of two
weeks. During different days of the week and times of the days research assistants intercepted
customers who had consulted with staff when their visit was coming to an end. They invited
them to participate in the survey in return for a bottle of Bordeaux wine. Upon agreeing,
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participants received a paper-and-pencil questionnaire containing questions about the service
encounter, the wine counselor, and themselves.
Psychometric measures were identical to the ones employed in Study 1 and included
perceived dominance (α=0.78, M=4.78, SD=1.16), competence (Fiske et al., 2002; α=0.78,
M=6.48, SD=0.61), warmth (Fiske et al., 2002; α=0.88, M=5.48, SD=1.24) and attractiveness
(α=0.69, M=4.88, SD=1.16). Different than in Study 1, the key dependent variable was a 4item evaluation of the shopping experience (Mattila and Wirtz, 2001, α=0.75, M=3.70,
SD=0.73). Subjective wine knowledge was assessed using Flynn and Goldsmith’s 4-item
measure (α=0.75, M=3.70, SD=0.73) (Flynn and Goldsmith, 1999).
To test Hypotheses 1 through 3 and the mediating roles of competence and warmth in the
dominance – shopping experience relationship, we employed Preacher and Hayes’ (2004)
PROCESS macro (model#6). Counselor attractiveness was included as a covariate. The
results indicated a total positive effect of dominance on shopping experience (B=.18,
SE=.087, LLCI=.01, ULCI=.35). This effect was mediated sequentially by competence and
warmth, as indicated by a significant indirect effect (B=.06, SE=.031, LLCI=.01, ULCI=.13).
Specifically, the wine counselor’s dominance had a positive effect on competence (B=18,
t=3.13, p=.002), which, in turn, had a positive effect on warmth (B=.99, t=6.86, p=.001),
which, then had a positive effect on the shopping experience (B=0.315, t=3.09, p=0.003). The
direct effect of dominance on the shopping experience was non-significant (B=.11, SE=.085,
LLCI=-.06, ULCI=.28). These effects emerged in the presence of a significant effect of
attractiveness on the shopping experience (B=.21, t=2.24, p=.028).
To test for the moderating role of subjective product knowledge in the dominancecompetence relationship, we employed Preacher and Hayes’ (2004) PROCESS macro (model
1), again with attractiveness as a covariate. The findings indicate that the dominance x wine
knowledge interaction effect is significant (B=-.18, t=-2.30, p=.024). Spotlight analysis yields
that the effect of dominance on competence is significant and strong at low levels of wine
knowledge (Mean - 1 SD: B=.31, SE=.082, LLCI=.15, ULCI=.47), moderate at intermediate
levels at the mean (B=.18, SE=.056, LLCI=.07, ULCI=.29), and non-significant at high levels
(Mean + 1 SD: B=.06, SE=.075, LLCI=-.09, ULCI=.21). The effect of attractiveness on
competence was not significant (B=.05, t=.95, p=.34).
4. DISCUSSION
The findings indicate that dominance is a significant influencer of counselor effectiveness,
but social and instrumental outcomes yielded more mixed results. While competence and
warmth conspired to yield an overall curvilinear effect of dominance on approach-avoidance
in the more general contexts of Study 1, they worked in sequence to channel a linear positive
effect on the experience wine shoppers had in wine stores in Study 2. This finding
underscores the unique nature of wine counseling. It seems plausible that this differential
outcome traces back to the nature of the product (i.e., wine vs. apparel or nutrition), the
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different dependent variable (post shopping evaluation of the experience vs. a priori
approach-avoidance), or the setting in France (wine as an integral part of national culture).
Managers may be interested in the straightforward applicability of our findings. Rooted in
subtle nonverbal cues such as body posture (Carli et al., 1995), head tilt (Mignault &
Chaudhuri, 2003), or body canting (Halberstadt & Saitta 1987), dominance is relatively easy
to engineer with counselors to achieve desirable levels. We hope the contribution of this
study will stimulate further research in this field.
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Did They Grow Into Wine? Revisiting a Gen Y Cohort to Investigate How
their Interaction with Wine has Evolved over Time
Caroline Ritchie
Cardiff Metropolitan University, UK
[email protected]
Abstract:
Purpose: In 2008 seven focus groups were conducted in the UK with Gen Y participants. A
major finding was that although many did not drink much wine now, often only at formal
meals, they all believed that they would ‘grow into wine’. The purpose of this research is to
conduct a follow up study to investigate how and why their interactions with wine have
evolved in the intervening years. Although there has been much research undertaken across
all age groups and their interaction with wine at that moment in time investigated it is much
more unusual to have a follow up study where the current behaviour of wine consumers can
be compared to their original, much more naïve interactions and beliefs.
Design/methodology/approach: The link person for each of the seven focus groups was
contacted. Two of the focus groups were unable to be reconvened because they were not
friendship groups but work groups. In each of the other focus groups it was possible to
reconvene the original focus groups with most of the original participants (anticipated to be
60% at the time of submission). The focus groups were held between August and October
2015 and replicated the same conditions, i.e. location type, questions and stimulators as the
original focus groups.
Findings: At the time of submission the primary data collection had not been completed.
However, it was anticipated that the findings will a new perspective to our understanding of
how and why social interaction behaviours change over time.
Keywords: Wine, UK, Generation Y, Consumption Behaviour, Intergenerational Learning
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1. INTRODUCTION
As, amongst others, Mueller et al. (2011) and McDonald et al (2013) point out consumers
have frequently been divided into generational cohorts based upon the year of their birth for
the purpose of academic study in particular in relation to market research. These cohorts are
linked by a common history of lived events which have impacted upon their lives in
particular ways for example living through a world war or, more currently, experiences of the
adult workforce during a worldwide economic recession. In terms of this paper Gen Y refers
to the generational cohort borne between 1977 and the final years of the twentieth century
(Charters et al, 2011: Mueller et al, 2011: McDonald et al. 2013) also known as Millennials.
Mueller et al’s (2011) international study of the Gen Y effect was based upon primary data
collected in 2009. It concluded that differences in interaction with wine were not particularly
generational but were much more based upon culture, particularly an ‘old world’ versus ‘new
world’ understanding of appropriate wine related behaviours. This study did however identify
that Gen Y consumers were much more promiscuous than the other generational cohorts in
relation to types of alcohol consumed. Along with Ritchie (2011), whose data was collected
in 2008, the study concluded that this promiscuity was probably due to the dominance of the
single lifestyle in this group at the time that the data was collected. McDonald et al.’s (2013)
work also suggested that differences in wine consumption behaviour between generational
cohorts is much less differentiated than previously thought and concluded that further
research is needed to better develop our understanding of the value of using generational
cohorts to segment the wine market.
2. BACKGROUNG TO THE RESEARCH CONTEXT
In 2008 seven focus groups were conducted in the UK with Gen Y participants (those aged
18 – 30). This was as part of an international project investigating cultural differences in
relation to wine, champagne and sparkling wine in particular, in the Anglophone world
(Ritchie, 2011: Charters et al., 2011: Velikova et al., 2014). A major finding of the UK study
(Ritchie, 2011) was that although many participants, particularly males, did not drink much
wine at that time, often only at formal meals, they all believed that they would ‘grow into
wine’. In some instances, where older participants had moved from a single lifestyle to living
with a partner this had already started to happen often because of the sharing nature of
opening a bottle of wine (Ritchie, 2011).
In line with McDonald et al’s (2013) call for further research into the value of segmenting the
wine market into generational cohorts the broad purpose of this current research project was
to conduct a follow up study to investigate how and why their interactions with wine have
evolved in the intervening years. The particular focus was to compare the assumptions about
how the participants had thought their interaction with wine, both purchasing and
consumption, would change as recorded in the original study with their actual current
interaction and behaviour. This study is of particular importance given the falling level of
alcohol consumption per se in the UK, see table 1, and stagnation of the still wine market, see
table 2.
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Table 1. Alcohol Consumption Trends in the UK (Wilson, 2014)
Table 2. UK wine volume as recorded by Her Majesty’s Revenue and Customs Office
(Wilson, 2014)
As previously noted, there has been much research undertaken across all age groups and their
interaction with wine at that moment in time investigated. It is much more unusual, however,
to have a follow up study where the current behaviour of wine consumers can be compared to
earlier, much more naïve, interactions and beliefs.
2.1 Development of the research question
As Ritchie (2007; 2009), amongst others, has pointed out the UK has had a very long history
of interaction with wine, buying and consuming it, from approximately 50BC onwards when
the British Isles started to communicate with the Roman Empire. However, for climactic
reasons, it has rarely produced wine on a commercial scale; what was produced was often for
use at Christian religious services. There is now a very small commercial wine production
industry specialising in high quality sparkling wines; an average of 3.15 million bottles
(2.36 million litres) per annum representing approximately 0.14% of the UK market, (English
Wine Producers, 2014). Almost all wine bought and drunk in the UK therefore is imported. In
2013 total volume sales were 1.31 billion litres with a value of £12.51 billion (Warren, 2014).
Despite the current small fall in still wine consumption the UK still remains one of the most
significant wine import markets in the world, out ranked only by the USA and China.
Although wine is now a familiar beverage to all in the UK who consume alcohol this has not
always been so. It was traditionally an elitist beverage consumed only by the wealthy whilst
beer was the choice of the majority of the population. Wine became democratised in the UK
in the 70s and 80s when it became available in supermarkets (Jenson and Jenson, 1993). This
means that in the UK, as a non-producing nation, Gen Y is the first generation who have no
memory of not being able to buy the fruit driven wine styles pioneered by the Australians as
easily as any other Fast Moving Grocery Commodity (FMGC) such as Coca Cola, tea or
coffee in every supermarket in the land (Ritchie et al, 2009).
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The upsurge in wine purchase and consumption stimulated by the availability of wines in
supermarkets, together with an increasing number of women in full-time employment and
financially independent, also stimulated an upsurge in wine availability in the on-trade, pubs
and bars. Traditionally pubs were seen as masculine places where beer was sold with poor
quality wine offered for women (Pratten and Carlier, 2012) therefore wine bars, seen as
sophisticated and not male dominated, developed to meet the gap in the market. Currently
most pubs and bars now provide wine along side beer and food. At the top end of this market
gastro-pubs have developed to meet the demand for premium quality beer, wine and food in a
less formal, less expensive environment that restaurants. As a result Generation Y in the UK
has grown up in an environment where, although it can be, wine does not have to be
expensive or exclusive and is very easily accessible.
One downside of this commoditisation from an industry perspective is that although 61% of
UK adults regularly buy wine only 38% are prepared to pay premium prices, considered to
start at about £9.00 (Warren, 2014: Wisson, 2015). The current average off-trade bottle price
in the UK is just under £5.00 having risen from around £4.50 in 2008 (Ritchie, 2011). Most
of the increase in spend has been due to an increase in tax rather than any sign of trading up.
This is curious since many of the older participants in the original focus groups had said that
they were looking forward not necessarily to drinking more wine but to drinking better
quality wine, as they became more able to afford it. This would imply an intention to trade
up yet, as table 2 shows, the UK still wine market is currently stagnating, partly due to
maturity and partly to the recession. In contrast the sparkling wine market, driven by
prosecco is continuing to expand. Although it is anticipated that the UK still wine market will
rise again in the foreseeable future as the recession recedes (Warren, 2014: Wisson, 2015) the
question of whether the rise in popularity of sparkling wines as opposed to still wine and
champagne is long term or not is still to be investigated.
This question of usage of wine is also of academic interest from a socio cultural perspective;
whether the image of wine and thus interaction has changed, is changing in the UK. This
raises the question of whether Gen Y see wine as the ordinary FMGC identified by Ritchie et
al (2010) or whether it has the more elitist quality, image usually discussed in social wine
consumption research. On the one hand wine is now seen as an everyday commodity, as
likely to be offered to friends at home as a cup of tea or coffee (Ritchie, 2007) whilst on the
other it still retains the elitist image noted by Kant and Bourdieu particularly in public
consumption situations (Ritchie, 2009)
As Ritchie (2011) points out many authors have commented upon the significance of
intergenerational learning. Some suggest that the social and cultural significance of food and
drink is learned from babyhood, since the identification of good and bad food and drink is
essential to survival as well as cultural identification. Others suggest that socialisation
towards alcohol is learnt in adolescence. Either way it is very likely that the strong belief that
they would ‘grow into wine’ held by the original participants was due to intergenerational
learning and expectations about acceptable social behaviours within their cultural groups.
However, Gen Ys’ parents learnt their behaviours from their parents, born in the first half of
the twentieth century when wine was not freely available in the UK and always perceived as
an elitist product consumed by a small wealthy section of the population. It was during the
young adulthood of GenYs’ parents that wine became democratised in the UK and a
commoditised product in some circumstances. This may help to explain why there is such a
strong two wine perception in the UK, ordinary wine for everyday and special wine for public
consumption (Ritchie, 2009).
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Gen Y is the first generation to grow up in a UK where wine is both an FMCG and an
exclusive purchase for a special occasion for the majority of the population. Therefore the
attitudes which their parents inculcated into them will not necessarily be replicated by them.
As table 1 shows, although alcohol has become more freely accessible in the UK alcohol
consumption per capita is falling. As Warren (2014) and Wisson (2015) discuss, although
wine consumption is likely to rise in the future it is very unlikely to rise again at the rates
seen in recent decades. In addition some anecdotal evidence suggests that for some social
groups, particularly young adult AB consumers, although happy to drink alcohol in some
social situations tap water is their preferred beverage of choice in many others. Traditionally
it has been the AB social groups who have purchased and consumed most wine.
2.2 The research question
As previously discussed, this is the first generation for whom wine has always been easily
purchased, not necessarily expensive and used in both formal and informal situations. Whilst
the participants said that they would grow into wine, by changing their drink of preference or
by trading up in quality this aspiration is not reflected in the UK still wine market. This
research will investigate whether this is due to a change in intent, which may have significant
implications for the wine industry, or simply a reflection of delayed consumption due to the
recent economic climate.
This research will also investigate whether traditional interactions with wine such as with
meals, sharing and gifting remain relevant to adult wine consumers in the UK today. It will
seek to develop an understanding of where accepted wine related behaviours and cultures
have changed and the reason why change may or may not have occurred. In doing this it will
be seeking to contribute towards a deeper understand of how the UK wine market is evolving.
3. LONGITUDINAL STUDY VALIDITY
According to White and Arzi (2005, pp138) a longitudinal study is one in which “two or
more measures or observations of a comparable form are made of the same individuals or
entities over a period of at least one year”. Wond and Macauley (2011) suggest that it is an
embedded study which extends over a period of time, number of years. Both however suggest
that much of its value lies in its temporal nature which enables the researcher to develop a
richer understanding of how change is occurring in relation to the phenomenon being studied.
In addition it enables the significance of events, actions or beliefs which may have originally
appeared to be insignificant to be reviewed and visa versa.
They both also agree that these types of study are rare because of the commitment required in
time by both the researcher and the participants; by the physical need for the researcher to
keep all the original data over a long period of time so that it can be revisited as the research
progresses and because familiarity between the researcher and the participants, in this case
the link person for each focus group, may influence or bias the outcomes. In this instance the
issue of familiarisation with the researcher is not considered to be an issue since there is both
a significant age and geographical distance between the researcher and the participants which
has meant that very little interaction has taken place in the intervening years. Familiarisation
with or rejection of the subject, social interaction with wine, is the subject of the research
therefore this is considered to be a benefit to the study. It is however accepted that, as with
other methods which rely on several iterations (such as the Delphi Technique), there will be
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some attrition of the participants and that unlike other iterative studies, in this study new
participants cannot be brought in simply to increase numbers.
This study uses White and Arzi’s (2005) definition of a longitudinal study since in this
instance the same participants are asked about the same subject after a period of years in
which their relationship with the subject (wine) is likely to have changed because of natural
maturation in relation to alcohol and wine usage plus other internal, personal, and external,
market, impacts upon their lifestyle.
4. METHOD
The original seven focus groups ranged in size from six to nine participants with an overall
gender balance representative of the UK wine consuming population. Five of these focus
groups were friendship groups; two were based on work groups. Six of the focus groups had
a demographic profile reflecting AB social groups, which is normal in much self selecting
wine research. To test the validity of the findings across a wider population one focus group
was also held in which participants came from social groups D and E. The focus groups were
set up using snowballing techniques where a suitable link person was identified by the author;
the link person then invited the rest of the participants. All the friendship groups were held in
the link persons’ home, the two work based groups were held on their work premises at the
end of the working day. This helped to replicate, as far as is possible in a research setting, a
naturalistic setting in which wine might be discussed, sitting around in a familiar setting with
a peer group of some sort. The focus groups were held in the autumn of 2008 across the UK
although primarily in the south and south-east since most wine is purchased in these regions
of the UK; see Charters et al (2011) and Ritchie (2011) for full details.
Since the aim of this research is to establish how the original participants interaction with
wine has evolved over time the method selected for this research was to repeat as closely as
possible the earlier study by reconvening those focus groups which could be reconvened with
the same participants. These are the five friendship groups. In each instance the original link
person was happy to reconvene their focus group although only 60% of the previous
participants were still in touch with the link and willing to participate in this second study.
However, as previously discussed there is always some attrition in longitudinal studies so this
is not considered to be overly detrimental to this project. The same subjects were covered in
the same format although the emphasis and tense differed.
Since the focus groups were planned for the summer and autumn of 2015 to accommodate
the participants it was not possible at the time of submission of this paper to give the exact
demographic detail of the participants nor of any issues raised in conducting them. This will
be addressed in publications arising from the completed study.
5. ANTICIPATED OUTCOME THEMES
In the 2008 study various themes emerged which suggested that Gen Y may be interacting
with wine differently from their parents in some ways and in a similar fashion in others
(Ritchie, 2011). A key theme, which reflects an almost universal interaction with wine, was
that as wine is so integral to the meal experience as they started to participate more
proactively in public meal occasions, formal (e.g. work related) and informal (casual meals
with friends) in the home and outside, they would ‘grow into wine’ and it was likely to
become a beverage of choice. This behaviour would be supported in the informal
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environment by moving into partnerships and sharing; as one male participant explained, you
can’t share a pint of beer but can and will share a bottle of wine. In the formal public
environment most, as Ritchie (2009) has suggested, had expected to become confident in
understanding and even initiating rituals such as ordering the appropriate wine with a meal.
These activities would have been learnt via normal socialisation and intergenerational
learning such as participating in a meal with their parents or older relatives; to what extent
this cultural behaviour has been adopted will form part of the current research.
However, the participants also discussed behaviours which did not reference that of earlier
generations. In the 2008 study many of the participants were either working part–time or had
recently finished working in the hospitality industry as part of fairly common early
employment, pre career, type work. They highlighted two issues in particular which
challenged other accepted research particularly in relation to purchasing situations. The first
issue raised was that the Gen Y participants were very happy to buy from supermarkets even
for their, rare, gifting occasions. They found supermarkets to be familiar, convenient and
easy to use, using them as Nordfalt (2009) has suggested as pantries stocked ready for any
planned or unplanned event which arose. Specialist off licences on the other hand they found
intimidating, expensive and inconveniently located and saw no reason why they would ever
want to use them. This was despite much previous research showing that wine for special
occasions was habitually sourced from specialist outlets by older adults. Gen Y believed that
you might have to talk to the staff in specialist outlets in order to be able to buy what you
wanted; they would be embarrassed by having to ask older staff, but didn’t want to ask staff
their age as they knew how little they themselves knew about wine. The second issue raised
related to the on-trade where many had seen and participated in bad practise, often
encouraged by management, such as pouring the wines they had been asked to promote
instead of the wine requested by customers in a bar if the customers were a bit drunk. This
activity was encouraged by their management because the wine being promoted made more
profit for the bar.
As a result of these actual experience the Gen Y participants didn’t trust staff the same age as
themselves in on or off-trade situations and didn’t want to ask older staff. Since much
research shows that it is trust and interaction between customers and staff which encourages
customers to move off the bottom line and trade up this research will investigate whether this
was an attitude of youth and inexperience or the perceptions still remain influencing current
behaviour.
Finally, in the 2008 research interaction with sparkling wines and champagne was discussed.
It was the UK cohort who were most able to and habitually did clearly distinguish between
sparkling wine and champagne; what they were, upon what type of occasion they could be
consumed and by whom, male or female (Charters et al 2011: Velikova et al, 2015). As has
been discussed still wine consumption is falling slightly in the UK but this is offset by the
rise in sparkling wines, started by cava and now led by prosecco. This research will
investigate whether this move towards sparkling wine consumption has impacted upon the
intention to trade up in still wines and what role sparkling wine currently plays in their lives.
As previously stated this paper is a work in progress but it is intended that the results will
shed light on how interaction with wine in the UK is evolving with all the implications that
this may have for academia and the wine trade.
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REFERENCES
Charters, S., Velikova, N., Ritchie, C., Fountain, J., Thach, L., Dodd, T., Fish, N., Herbst, F.,
and Terblanche, N. (2011), “Generation Y and Sparkling Wines: A Cross-cultural
Perspective”. International Journal of Wine Business Research, Vol. 23 No.2, pp. 161 –
174.
English Wine Producers (2014), “A Few Facts and Figures About English and Welsh Wines
and Vineyards”. http://www.englishwineproducers.co.uk/background/stats/ (accessed 23
July 2015)
Jenster, P., V. and Jenster, L. (1993), “The European Wine Industry”, International Journal of
Wine Marketing, Vol. 5 No. 1 pp 30 – 74.
McDonald, J., Saliba, A. and Bruwer, J. (2013) “Wine Choice and Drivers of Consumption
Explored in Relation to Generational Cohorts and Methodology”, Journal of Retailing
and Consumer Services, Vol. 20 No. 3 pp 349- 357
Mueller, S., Remaud, H. and Chabin. (2011) “ How Strong and Generalisable is the
Generation Y Effect? A Cross-cultural Study for Wine”, International Journal of Wine
Business Research. Vol. 23 No 2 pp 125-144
Nordfalt, J. (2009), “Unplanned Grocery Purchases: the Influences of the Shopping Trip
Type Revisited”, Journal of Consumer Behaviour, Vol. 8 No. 1 pp1 – 13.
Pratten, J., B. and Carlier, J”, -B. (2012) “Women and Wine in the UK; a Business
Opportunity for Bars”, Journal of Food Products Marketing, Vol 18 No. 2 pp 126 – 138.
Ritchie, C, Ritchie, F. & Ward, R. (2009) “A Good Night Out: Alcohol-Related Behaviour in
Young Adults”, Worldwide Hospitality & Tourism Themes, Vol.1 No. 2 pp 169-193
Ritchie, C. (2009), “The Culture of Wine Buying in the UK Off-Trade”, International Journal
of Wine Business Research. Vol. 21 No. 3 pp 194-211.
Ritchie, C. (2011), “Young Adult Interaction with Wine in the UK”, International Journal of
Contemporary Hospitality Management, Vol. 23 No.1, 99- 114.
Ritchie, C., Elliott, G., Flynn, M. (2010), “Buying Wine on Promotion is Trading-up in UK
Supermarkets: a Case Study in Wales and Northern Ireland”, International Journal of
Wine Business Research, Vol. 22 No. 2 pp 102 – 121.
Velikova, N., Ritchie, C., Charters, S., Fountain, J., Dodd, T., Thach, E., Fish, N. (2015),
“Status or fun? A cross-cultural examination of younger consumers' responses to images
of champagne and sparkling wine”; submitted to International Marketing Review
Warren, C. (2014), “Still, Sparkling and Fortified Wine”, Mintel Group Ltd. October
http://academic.mintel.com.ezproxy.cardiffmet.ac.uk/display/715866/# (accessed 23
July 2015)
White, R. T. and Arzi, H. J. (2005), “Longitudinal Studies: Designs, Validity, Practicality and
Value”, Research in Science Education. Vol. 35 No. 1 pp 137 – 149.
Wilson, T. (2014), “Wilson Drinks Report, V17”, December, www.wilson-drinksreport.com, 2x2 Development Ltd.
Wisson, C. (2015), “Attitudes Towards Premium Alcoholic Drinks”, Mintel Group Ltd.
March http://academic.mintel.com.ezproxy.cardiffmet.ac.uk/display/715866/# (accessed
23 July 2015)
Wond, T. and Macaulay, M. (2011), “Extending Time- Extended Benefit”, Public
Management Review. Vo1. 3 No. 2 pp 309 – 320.
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Benefits convincing wine consumers - Developing a unique selling
proposition for Georgian wines based on focus group analysis
Lela Griessbach
FOM University of Applied Sciences Berlin, Germany
[email protected]
Sophie Ghvanidze
Heilbronn Institute for Applied Market Research, Heilbronn University, Germany
[email protected]
Jan Lakotta
FOM University of Applied Sciences Berlin, Germany
[email protected]
Abstract:
Purpose: Although the 500 endemic grape varieties and a 8000 year old traditional wine
making culture makes Georgia a cradle of wine, for German wine consumers Georgian wines
remain either unknown or are considered to be of poor quality. As the trends of behaviour of
German wine consumers have changed to being more environmentally-friendly and seeking
authenticity, and because Georgian wines could correspond to these trends, this paper aims to
examine the attitudes of German wine consumers towards Georgian wines through explicit
communication of these benefits.
Design/methodology: A qualitative research method was adopted, and focus group
discussions including wine tasting session were carried out.
Findings: We found that Georgian wines have the potential to meet the demands of
sustainable lifestyle wine consumers. The ancient traditional Georgian winemaking method of
wine fermentation and ageing in so-called qvevri provides strong evidence to German
consumers to reinforce perceptions of Georgian wine as an authentic and natural product. The
research has confirmed that Georgian wines convey positive social and emotional value and
that quality standards have been accepted by consumers. When choosing appropriate channels
for the promotion of Georgian wines and emphasizing the relevant benefits that German
consumers are seeking, it can be seen that Georgian wines have a great potential to be
perceived as premium products.
Practical implications: The findings of this study can be adopted and used for the
development of an effective marketing concept for Georgian wine in export markets
Keywords: Wine Consumption, Georgian wine, Consumer Behaviour, qvevri-wine
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INTRODUCTION
As the biggest wine importer in the world, Germany presents a challenging environment for
Georgian wines (BMEL, 2015). Because of their novelty they are mainly known only among
wine connoisseurs in Germany and in addition there is no effective country branding strategy
promoting Georgian wines in export markets. One would be wrong in thinking of Georgian
wines as newcomers on the German and international wine markets, since around 500
endemic varieties of grapes and an ancient traditional wine making culture over the past 8000
years shows Georgia to be a cradle of wine production (Anderson, 2013). Wine fermentation
and ageing in so-called qvevri (an egg-shaped clay vessel) buried in the earth is evidence of
the world's oldest wine making method (Kharbedia, 2015). The qvevri phenomenon was
made part of UNESCO’s Intangible Cultural Heritage List in 2013 (UNESCO, 2013). During
the Soviet era, Georgia was the major wine supplier for the Russian and former CIS-country
markets. After the Russian embargo in 2006, Georgian wine companies began to penetrate
western European markets without having any experience in the development of international
marketing strategies (Ghvanidze, 2012). Despite this, exports were extended to western and
eastern European countries as well as to China, Japan and the USA (NSO, 2015).
German wine consumers have become tolerant of wines from other countries, and secondly,
wine consumers have started to think in a more environment-friendly way and to look for
authentic products which promise added value (Klohr et al., 2012). As for Georgian wines,
they offer both a unique traditional wine-making background and organic production. For
example, in accordance with certain rules and traditions, the wine made in qvevri does not
contain any chemicals or additives (Kharaishvili, 2014; Kharbedia, 2015).
In this context the following study aims to find out: a) the overall perception of Georgian
wines; b) if German wine consumers consider Georgian wines as sustainable and authentic;
and c) the most suitable promotional channels to communicate the above mentioned benefits
to German consumers. In order to obtain insightful results, this study has adopted a
qualitative research method. The first part of the paper reviews relevant literature about
changes in wine consumer behaviour affected by the environmental awareness of wine
consumers and their desire for authentic products. The next chapter describes the methods of
the empirical research, and in the final part of the paper we present and summarise the
findings and discuss the practical implications.
1.1. German Wine Consumer behaviour
Researchers argue that there is a tendency among customers in Germany to purchase high
quality products with premium prices; this has played a significant role in food purchasing
processes in the past and is clearly increasing (Hoffmann, 2014). As wine is becoming a
luxury product and is often bought for specific occasions, German consumers attempt to
avoid risk by accepting high prices but also anticipate getting special value by paying more
(Klohr et al, 2012). The fact that more and more German consumers buy eco-friendly wines
means that their increased concerns about environmental issues have an impact on their wine
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consumption behaviour as well (Klohr et al., 2014). Klohr et al. (2014) found that
connoisseurs in Germany with high involvement in wine appreciation and lifestyles related to
sustainability drink wine with higher frequency and buy more expensive wines that they
perceive to be of high quality. Also concerned non-experts consider characteristics of
sustainability in their purchasing behaviour (Klohr et al., 2014). Even if it seems that German
consumers have differing understandings of sustainability which generally involve not only
environmental aspects and anticipated responsiveness of the producer to the needs of society,
but also the economical feasibility of implementing these activities (Poitras and Donald,
2006), sustainable connoisseurs and concerned non-experts together represent about half of
the total wine consumers in Germany; they therefore need to be considered significantly in
the marketing process of sustainable wine (Klohr et al., 2014).
Another key factor influencing German consumer behaviour is the demand for individual
product characteristics (Klohr et al., 2012). This has become crucial because of globalisation,
where traditional cultural boundaries become blurred and things appear more and more
similar to each other (Smith and Skalnik, 1995). The concept of regionalisation as a
complement of internationalisation is gaining importance (Schade and Reuter, 2001).
Customers understand regional foods as being high-value, speciality or handcrafted products
closely linked to tradition and authenticity (Kuznesof et al., 1997). In the wine context that
means not only the identity of the region in terms of grape varieties or typical taste, but also
the adoption of specific craftsman’s knowledge and traditional winemaking techniques (DiazBone, 2005). Consumers recognizing this benefit are willing to pay more to obtain value
added premium wines (Klohr et al., 2012).
1.2. Position of Georgian Wines on the German Market
In her research about the country-of-origin effect of Georgian wine on German cosnumers,
Ghvanidze (2012) identified four consumer segments. Among these consumer segments,
image oriented wine connoisseurs perceived Georgian wine most positively relative to the
other consumer sgemenst such as experimental, conservative and disinterested wine drinkers.
Participants in Ghvanidze’s (2012) online survey were mostly male, highly-educated and
highly involved wine consumers. The study indicates that German consumers do not consider
Georgian wine to be a high quality product, and this was linked to negative perceptions of
Georgia as an economically weak country with political instability. Despite the perceived
image of Georgia as being a hospitable country with an interesting and unique landscape,
Georgian wine did not convey social and emotional values to respondents, and consequently
consumers are not willing to apay a premium price for Georgian wines (Ghvanidze, 2012).
Segmentation of the German wine market and the marketing activities suggested by the
Georgian Wine Association (GWA, 2011) do not seem to significantly strengthen the quality
perception of highly-involved German wine consumers. On the one hand target groups such
as experienced wine consumer, looking for new, different and exclusive products and the
well aware ethnic market consisting of emigrants from former Soviet countries do not really
include consumers who have no or limited experience but have an interest in drinking
premium wines. On the other hand, the suggested strategy of GWA to export low priced bulk
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wine and its sale in supermarkets for low prices could evoke the feeling of disposing of lowquality wine (Anderson, 2013), which could result in brand damage to other products under
the country umbrella brand Georgian Wine (Khitarishvili et al., 2015; Eyler, 2005). In
summary, previous activities in the wine promotion sector are insufficient and require further
efforts (Kharaishvili et al., 2014) in order to build the image of Georgian wine as a high
quality product on the German wine market.
2. METHODOLOGY
A theoretical model of wine consumer behaviour was developed (Figure 1). The model
indicates that sustainability and authenticity have an impact on perceived quality that
supports the positive purchasing decision. Additionally, we added the third dimension method
of communication to the model as we intended to find out which promotional activities would
better help German consumers to perceive Georgian wine as a premium product. In order to
validate the theoretical model, a qualitative research approach was applied, allowing us to
understand, describe and explain social relationships through the consideration of individual
perspectives (Flick, 2007). A qualitative research method enables psychological exploration
in order to gain a deeper insight into consumer behavior and consumer perceptions
(Kitzinger, 1995). Because wine is associated with positive feelings and emotions, we
utilised focus group discussions in order to allow respondents to express their feelings, beliefs
and emotions open-mindedly, on the basis of both previous knowledge and experience gained
during wine-tasting (Strauss und Corbin, 2008). Such subjective “live” interactions and
information exchanges between researchers and participants requires flexibility and
spontaneous action of researchers that is only permissible in qualitative studies, where data
elaboration and analysis are based on non-standard qualitative survey methods (Flick, 2007).
We decided to gather rich, experiential data through focus group discussions that supported
the qualitative research benefits described above (Threlfall, 1999). In order to assist group
members in expressing their thoughts and feelings about Georgian wine, the use of wine
tasting sessions as a projective technique was integrated. This method can generate insightful
data and reveal both the uncertainty that can influence consumers’ product evaluation and the
multiple evaluation pathways that occur while tasting food and beverage (Pettigrew and
Charters, 2008). In this way we gained an exceptional opportunity to experience first
reactions and capture honest opinions about Georgian wines from focus group interview
participants.
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Figure 1: Wine Consumer Behaviour Model
For group discussions, we focused not only on wine connoisseurs but also included
aspirational/experimental and enjoyment wine drinkers (Hall and Winchester, 2001;
Ghvanidze, 2012). The common characteristic of all of them was an interest in wine drinking,
openness to wines from other countries, lifestyle and willingness to pay for premium products
(Bruwer et al., 2002), all of which are relevant to Georgian wines. According to the study by
Ghvanidze (2012), experimental wine drinkers are the most appropriate consumer segment
for Georgian wine. On the basis of the above conditions, thirteen highly educated wine
drinkers ranging in age from 25-62 with a regular income were chosen. The grouping was
made at random in three parts. Because of the small groups and through specifically designed
questions, all respondents could actively participate. In order to gain accurate results, the
discussions were structured around three main topics: three types of wine were tasted (white
dry, red semidry and white qvevri wine), the selection of which was based on consumerpreferred references in a German online shop for Georgian wines.
Each focus group took one and a half hours on average. All three sessions were audiotaped,
transcribed and analysed according to the deductive category application method of content
analysis of Mayring (Groeben and Rustemeyer, 2002). The qualitative step of analysis
consisted of the interpretation of recorded communication by assigning particular text
passages to research questions put into categories (Mayring, 2000). This should not be
confused with the methodology of the grounded theory of Strauss and Corbin (2008), where
the categories are developed out of the collected data during theoretical sampling. Even
though the content analysis involves a high level of subjectivity, we tried to work closer to
original wordings. Only single-person analysis was conducted. This is the first time such a
survey has been conducted in regard to Georgian wine on the German market.
3. FINDINGS
Through the focus group discussions, we captured dynamic and interesting asessments of
individuals’ attitudes, perceptions and opinions when examining: a) the overall perception of
Georgian wines; b) if German wine consumers consider Georgian wines as sustainable and
authentic; and c) the most suitable promotional channels to communicate the above
mentioned benefits to German consumers.
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Social and environmental responsibility in the production process
When talking about working conditions at Georgian wineries, all participants assumed that in
general, because of low living standards and high unemployment in Georgia employees are
perhaps not paid well, but because staff may have been recruited among neighbours, friends
or relatives, a good relationship between employers and employees was expected.
“[It is] difficult to say, but I would say it [working conditions] is just like in Europe,
although it is also different within Europe.” (Kati, 25)
“I assume children work there.” (Kitty, 34)
However, other participants thought that if children support their family voluntarily without
neglecting their schooling, this should not be considered child labour. When it came to
environmentally friendly activities and production, nearly everybody answered that because
this is associated with considerable additional expenses, Georgian winemakers would not be
able to have enough financial resources and capacities to apply additional eco-friendly
production methods. An interesting approach was provided by one female participant:
“I would say that grapes in Georgia are healthier then in European countries because of
the climate and terroir; in Germany for example, vintners have to use pesticides and
chemical fertilizers.” (Coni, 62)
Most female group members indicated that they had recently bought more and more organic
wines because they experience no headache the next day, and in addition have a clear
conscience by supporting environmentally friendly production.
“If wine tastes good I would drink it, but for me how the [wine] production background
plays an important role, and how the relationship with employees is…and how sustainable
the whole [process] is. If I knew that everything went well and the family [business]
worked hard, it [wine] would automatically taste much better to me.” (Miriam, 31)
Even though some of the participants disagreed with this approach, stating that sometimes
signals as “organic” etc. mislead consumers to experience “good taste” and to automatically
generate “good conscience”, all of them agree that the background information on wine
production would somehow influence their purchasing decision.
Exceptional wine making method
After having tasted qvevri wine, all participants were enthusiastic about its specific taste and
orange, honey-like colour. They were delighted when the researcher provided them with
detailed information about the Georgian traditional winemaking method.
“The most fascinating thing is that it [qvevri wine] has been produced in a very specific
way, and everyone wants to have something special.” (Martin, 38)
“When you know the history [of wine] it automatically changes the taste.” (Thomas, 47)
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Because of the exclusivity of qvevri wine, everyone suggested that it was good idea to buy it
for a present. In addition to the high price (above 13 EUR per bottle), the very specific taste
was the reason why not all participants would like to buy it very often.
“I think that for my own consumption I would not pay so much, but for family events or
dinners with friends I would like to buy it [qvevri wine].” (Isabella, 38)
“Well…I would buy it [qvevri wine] to impress others…as a present in any case…but it
tastes good to me as well.” (Kati, 25)
All participants were fascinated that despite the fact that these unique wines, made by the
oldest natural winemaking method in the world and with craftsmen’s traditions, comes from
Georgia, a country that they had not heard a lot about;
“All of these things [qvevri, traditional wine-making process, wineries, people] there [in
Georgia] impress me very much. I think I would have a stronger appetite for drinking this
wine when being there.” (Kitty, 34)
“We would travel to Georgia with great pleasure, but not only because of the wines.
This is of course very interesting (…) but in general, we are not familiar with this country
[and therefore would like to learn more about it].” (Nina, 38)
Perceptions of Georgian wine
Most of the focus group participants thought that mainly small sized, family-run companies
produce wines in Georgia, and therefore the wines are of a high quality. Participants
confirmed that Georgian wines provide strong competition to other well-known wines
through their history and variety of taste.
“I have realized how good the Georgian wines are. We have tasted three wines and all of
them impressed me. And yes, I find the bottle packaging and the labels [of the presented
wines] very attractive.” (Isabella, 38)
“When drinking traditionally produced wine, I have the feeling that it is authentic and
natural. Then I think about health, and that makes me feel better.” (Nina, 38)
“I am not really a wine connoisseur and don’t drink much wine, but I am so interested in
the history [of Georgian wines], that I would buy them with pleasure.” (Martin, 38)
Everyone affirmed that they would certainly recommend Georgian wines to others.
Desired communication channels for Georgian wines
Generally, all participants preferred to obtain information about Georgian wines in wine
stores and at merchants who provide wine tasting as an option. Other additional promotions
such advertising, events or newspaper articles about Georgia and its wines with taglines
stating - “wine history begins in Georgia” were strongly desired.
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“They have to say: we invented wine [the oldest production method] and that is why we
are the best…[because of the high prices they have to say] we have the best wines and
therefore they are expensive.” (Nina, 38)
Participants with more interest in details preferred comments of sommeliers and connoisseurs
in the blogs. Others said that they would like to share their opinions on Facebook and follow
group discussions about Georgian wines there. Suggestions on food and wine pairings are one
of the important things that all participants said that they would like to get.
4. DISCUSSION AND MANAGERIAL IMPLICATIONS
In this research we adopted two relevant aspects of German wine consumer behaviour in
order to examine quality perceptions of Georgian wines based on qualitative research. Firstly,
we addressed the social and environmental responsibility of Georgian wineries as main
indicators of the perceived quality of Georgian wine. Secondly, we focussed on
characteristics of Georgian wine such as authenticity and the traditional handcrafted
winemaking methods in order to identify how these characteristics affect perceptions of
Georgian wine. Based on focus group discussions, we found that because of the authentic and
natural features of Georgian wines, consumers perceive them as a healthy product, made
through organic wine making methods by companies with social responsibility. Georgian
wines generate interest in their history and production methods among consumers, so
therefore producers and exporters should clearly outline and communicate explicit attributes
in this respect. In addition, this would help to eliminate some consumers’ assumptions about
Georgian wines still being sweet, low quality alcohol beverage as it usually was promoted in
the Soviet Era.
It is strongly recommended to concentrate on the unique Georgian winemaking methods as
the unique selling proposition (USP) when positioning Georgian wines on the German
market. As focus group participants emphasised that they would enjoy drinking Georgian
wines with friends and family as well as giving them as presents to impress others, we
conclude that Georgian wines indeed convey social and emotional value, which is not in
accordance with findings of Ghvanidze (2012). In contrast, the perceived quality of Georgian
wines identified in our current research also appears different to the findings of Ghvanidze. A
positive overall assessment of tasted wines and a willingness to buy them is closely linked
with the assumption that Georgian wine quality is acceptable for German wine consumers.
However, rigorous quality control measures must be carried out on an ongoing basis. Finally,
we identified the most suitable promotional channels and strategies for marketing, which
partially correspond to the research results of Szolnoki et al. (2014). Because of high demand
on direct experience before purchasing Georgian wines, merchants and specialized stores
should focus especially on wine tasting events. To attract the attention of wine consumers, an
advertising slogan such as “wine history begins in Georgia” should be implemented. By
choosing appropriate channels for the promotion of Georgian wines and emphasising the
relevant benefits that German consumers are seeking, Georgian wines have a great potential
to be perceived as premium products.
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In future studies the qualitative research method can be undertaken by measuring knowledge
of German wine consumers about Georgian wines as well as by survey based recruiting wine
connoisseurs prior to conducting focus group discussions. In further qualitative research the
intrinsic and extrinsic attributes of Georgian wine can be investigated which need to be
explored. Even though this research includes some limitations concerning the research
design, the findings can be adopted and used for the development of an effective marketing
concept for Georgian wine in export markets.
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Eyler, R. (2005), “Brand Damage Valuation: Theory and Practice”, International Journal of
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Ghvanidze, S. (2012), Bedeutung des Country-of-Origin-Effekts für die Wahrnehmung
deutscher Weinkonsumenten: eine Untersuchung am Beispiel des georgischen Weines,
Cuvillier, Göttingen
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(2002), Qualitative Forschung, 2. Auflage, Beltz, Weinheim und Basel, pp. 233-258
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the Australian Wine Market”, Asia Pacific Advances in Consumer Research, Vol. 4, eds.
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Characteristics, Preferences, and Purchase Drivers of
Hispanic Wine Consumers in the U.S.
Natalia Velikova
Texas Tech University, Texas Wine Marketing Research Institute, USA
[email protected]
Tim Dodd
[email protected]
Abstract:
Purpose - The study examines Hispanic consumers’ attitudes and interests related to wine
consumption and develops a profile of the U.S. Hispanic wine consumer. The findings will
assist the industry with marketing strategies and help to effectively target this consumer
segment.
Design/methodology/approach - The project utilized a mixed-method research design by
incorporating both qualitative (focus groups) and quantitative (consumer survey) methods.
Findings - The results suggest that Hispanic wine consumers drink wine fairly frequently;
prefer red wine, but also indicate strong preferences to sweeter wines. Hispanic consumers
perceive wine as a drink to be consumed at home, rather than in a restaurant or a bar. Price
was named as the top purchase driver, followed by personal preferences and family/friend’s
recommendations. The core cultural values of family, food, and social interaction are critical
factors in developing an interest in wine amongst Hispanic consumers. Acculturation levels
and generational status also play an important role.
Practical implications - The results clearly indicate that a generalized marketing approach is
unlikely to be useful to reach the Hispanic wine market. It is imperative to target this
emerging consumer market based on its specific needs. Special attention should be addressed
to younger, more acculturated consumers, as they are the primary consumers of wine, and
also advocates for wine for their parents and other groups of consumers.
Keywords: Hispanic wine consumers; emerging consumer markets; situational ethnicity;
product ethnicity
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1. INTRODUCTION
Globalisation of the wine industry has boosted competition in the oversaturated wine market.
As a result, producers worldwide seek new opportunities for their businesses, including
examinations of new consumer segments. The current study focuses on one such emerging
yet sizeable market of consumers - Hispanic wine consumers in the United States. As the
nation’s largest minority group of 50 million people, Hispanics are the fastest growing ethnic
group in the U.S. {U.S. Census Bureau, 2010 #678}. Increased collective spending power of
$1.2 trillion {Seling Center for Economic Growth, 2012 #693} accompany this growth,
adding to the market’s appeal.
Traditionally, wine has not been considered as a particularly appealing product for Hispanic
consumers. Nevertheless, documented evidence suggests that Hispanic adults have recently
been developing a taste for wine. For example, the percent of U.S. Hispanics who expressed
preference for domestic table wine was 12% in 1998. This percentage jumped to 22% in 2003
{Jung, 2005 #572}. A study of Texas residents’ attitudes towards local wines found that 13.6
% of respondents in a random sample of wine consumers identified their ethnicity as
Hispanic or Latino {Kolyesnikova, 2008 #674}. When an identical follow-up study was
conducted five years later, the number of Hispanic wine consumers in a similar random
sample jumped to almost 17% (Texas Wine Marketing Research 2012). The Wine Market
Council {, 2005 #694} conducted a survey asking respondents if they were drinking more,
less, or the same amount of wine as the year before. While amongst whites self-reported wine
consumption frequency increased by 11%, it rose by 31% amongst Hispanics.
Despite the growing interest in wine amongst Hispanic consumers, the industry has been slow
in recognizing recent shifts in consumer demographics and thus, the potential to expand its
traditional consumer base. Empirical research on wine consumption preferences of U.S.
Hispanics is also scarce and includes only a limited number of exploratory studies. The
proposed research aims to fill a gap in the existing body of knowledge on Hispanic wine
consumers. Specifically, the study develops a profile of the U.S. Hispanic wine consumer to
assist the industry with marketing strategies to effectively target this consumer segment.
2. CONTEXT
2.1. Ethnicity
Ethnicity has been found to be an important factor influencing wine consumption. Hussain,
Cholette, and Castald {, 2007 #571} suggested that whites and non-whites should not be
assumed to have the same attitudes and preferences towards wine consumption. This leads to
a need to examine factors that influence Hispanic consumer wine purchases, as well as
predominant attitudes, opinions, and interest of the Hispanic consumer relating to wine
consumption.
Although consumer behaviour research often considers ethnicity as an important factor to
identify differences amongst diverse demographic groups, ethnicity per se is rarely the
primary focus of research, thus offering only supplementary perspectives on the topics under
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investigation. The originality of the current research is that it takes ethnicity as the point in
case and approaches it not only as a demographic variable, but also conceptually – through
the prism of situational and product ethnicity concepts.
Specifically, we take the concept of acculturation as a general referent for consumer-based
examination of the Hispanic market. Acculturation and assimilation are related concepts in
that they both refer to the process of adaption to a new environment. Assimilation perceives
immigrants or other members of minority populations leaving behind traditional customs,
values and behaviours in order to conform to those of the host society. It is a social change in
which cultures of origin are abandoned in favour of the host culture. Acculturation, on the
other hand, is a different form of adaptation. While adapting, people are able to incorporate
values and social practices of the host culture while retaining elements of the culture of origin
{Gans, 2007 #687}. The marketing concepts of situational and product ethnicities, which
constitute the conceptual basis for the current study, are rooted in these analogues.
2.2. Situational ethnicity
Situational ethnicity is a concept grounded in acculturation {Okamura, 1981 #688;Padilla,
1985 #689}. It posits that people’s behavioural manifestations of their identity vary
according to various social contexts. These contextual influences are especially relevant for
members of minority cultures and/or those of mixed race/ethnicity as they tend to inhabit
more complex social environments than mono-cultural individuals. This creates the ability to
express their identity appropriately in different social settings {Stayman, 1989 #707;Zmud,
1992 #706}.
For example, a Hispanic female sales professional is likely to express her ethnic identity quite
differently across different situational settings - when at a business dinner with her nonHispanic colleagues; at a girls-night-out party with English-speaking girlfriends; or
celebrating a traditional holiday with her Spanish-speaking in-laws. It is likely that her choice
of food and beverages (perhaps including wine) would differ as well at each of these social
settings. This research is interested whether acculturation – and by extension situational
ethnicity – play a role in Hispanic consumers’ choices of wine.
2.3. Product ethnicity
Product ethnicity is another concept associated with acculturation that links culture and
product consumption. By examining Hispanic consumers’ evaluations of four different
products (laundry detergent, coffee, televisions and automobiles), Faber, O’Guinn &
McCarty {, 1987 #690} determined that levels of acculturation influence product attribute
evaluation, especially for the durable goods. Research on product ethnicity has focused on
consumer stereotypical associations between products and countries-of-origin, based on their
perceptions of the country's know-how and reputation relative to the design, manufacturing,
or branding of particular goods {Usunier, 2007 #691}. For example, tequila is typically
associated with Mexico, vodka with Russia, and rum with the Dominican Republic, while
France and Italy more strongly associated with wine.
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However, wine would not generally be perceived as a product that is regularly consumed by
Hispanics. We argue that this common perception could be the principal reason for the
largely untapped Hispanic wine market in the U.S. This research aims to begin the process of
building a body of knowledge on the Hispanic wine market and to identify prime factors that
determine attitudes, opinions, motivations, and purchase drivers of the Hispanic wine
consumer.
3. NEED STATEMENT AND STUDY SITE
The need to investigate the Hispanic market is particularly relevant to certain regions. U.S.
Census Bureau {, 2010 #678} reports that 75% of the total Hispanic population living in the
U.S. reside in eight states: California, Texas, Florida, New York, Illinois, Arizona, New
Jersey, and Colorado. Interestingly, six of these states (California, Florida, New York, New
Jersey, Texas, and Illinois) are the states with the largest wine consumption that cumulatively
account for 47.8% of the total U.S. wine consumption {Beverage Information Group, 2012
#679}.
The current research used the state of Texas as the study site. Texas is a state with a large and
rapidly growing Hispanic population (37.6% of total Texas population, according to the U.S.
Census Bureau, 2010). Texas was also considered an appropriate region for this study
because of the dynamic development of its wine industry. Within a relatively short time
period after the industry emergence in the late 1970’s, the number of Texas wineries
increased dramatically - from five in the early 1980’s to over 300 in 2014. The Texas wine
industry contributes $1.88 billion to the state’s economy, with an estimated retail value of
Texas wine at $134.1 million (MKF Research LLC, 2014).
4. PURPOSE
The current study investigates wine consumption needs, interests, and purchasing behaviour
of Hispanic consumers. Particularly, the research aims to: (1) examine predominant factors
that contribute to the development of Hispanic consumer interests in wine; (2) investigate
preferences and wine consumer behaviour patterns of Hispanic consumers; and (3) identify
factors that influence Hispanic consumer wine purchases. The ultimate goal of the project is
to compile a profile of the Hispanic wine consumer that would help the industry to effectively
target these consumers.
5. RESEARCH QUESTIONS
To achieve the objectives defined above, the following research questions were advanced:
RQ1: How do Hispanic consumers develop their interest in wine?
RQ2: What are the preferences and wine consumer behaviour of Hispanic consumers?
RQ3: What are the main wine purchase drivers of Hispanic consumers?
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6. METHOD
6.1. Research design
To achieve a comprehensive overview of the consumer market under investigation, the
project utilized a mixed-method research design by incorporating both qualitative (focus
groups) and quantitative (consumer survey) research methods. The focus groups were
employed to get a better understanding of the attitudes, opinions, and interests related to wine
consumption amongst Hispanic consumers; while the survey was used to obtain a more
structured, quantitative profile of this market segment.
6.2. Data Collection
6.2.1. Focus Groups
The focus groups were conducted in a conference room designed specifically for focus group
research and equipped with video and audio recording capabilities and a one-way mirror for
observation by researchers. A professional moderator conducted the discussions and
debriefing sessions. Three focus group sessions with Hispanic wine consumers were
conducted: two in English (for predominantly English-speaking consumers of Hispanic
origin), and one in Spanish (for predominantly Spanish-speaking consumers of Hispanic
origin). Each focus group comprised seven to ten participants. The total sample consisted of
26 participants. At the completion of the three focus groups, saturation of responses had been
achieved. No new ideas or categories emerged and adding more focus groups would have
been likely to produce repetition of themes. Therefore, a total number of three focus groups
was deemed sufficient for the purposes of this exploratory study.
6.2.2. Consumer Survey
Quantitative data on Hispanic wine consumers were collected through in-person intercepts at
retail stores that predominately target Hispanic consumers. A systematic sampling method
was applied where every 3rd consumer (regardless of ethnicity) was approached. A very small
portion of the completed surveys filled out by consumers who did not identify themselves as
being of the Hispanic or Latino origin (in the ethnicity question) were excluded from the
analysis. Trained bilingual data collectors personally distributed pen-and-paper
questionnaires to customers as they were leaving the store. A small token of appreciation (a
$10 gift card to the store where the data were collected) was offered as an incentive to
participate in the study.
6.3. Instrument
For the focus groups, using a theme guide approach, a discussion guide was developed to
ensure a practical structure for the focus group sequence. The discussion guide was divided
into several broad themes to obtain information about various attitudes and interests related to
wine consumption.
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A survey was then designed to include items that are aimed at compiling a more structured
profile of the Hispanic wine consumers – namely, wine preferences; wine consumption
behaviour; wine purchasing behaviour; and socio-demographic characteristics. Identical
questionnaires were available in English and in Spanish. Respondents could choose the
language of the survey based on their preferred language of communication. Two-thirds of the
sample chose the English version and one-third preferred to fill out the survey in Spanish. A
total of 414 valid surveys were collected and used for analysis.
7. FINDINGS AND DISCUSSION
7.1. Focus Group Findings
The focus group discussions were utilized to collect a concentrated set of opinions on
Hispanic consumer attitudes and interests related to wine consumption. These were
subjective opinions that were unlikely to be captured by a structured survey, which only
captures a ‘snapshot’ of data. Thus, focus groups were considered the most advantageous
method for collecting information on these themes. One particular theme reported in the
current study includes the development of consumer interests in wine (RQ1). In order to
appeal to Hispanic wine consumers, the industry needs to know how existing consumers
developed their interests in wine and focus on targeting those sources.
Family, which is a very strong influence in the Hispanic culture, played a significant role
here. Virtually all participants indicated that their interest in wine stemmed from family. For
younger participants, their parents introduced them to wine. These findings are similar to
other studies on younger (non-Hispanic) consumer socialisation with wine {Velikova, 2011
#746}. Early experiences with wine were found to be influenced by family - most likely
parents - across various geographic and cultural settings. What’s interesting in the current
study is that older participants also indicated that their interest in wine originated from their
family, but for them the influential factors were their children, who are more adapted and
more acculturated. It is likely that this new generation of grown-up children draw
information from broader sources and social networks than older generations. Members of
the younger generation, thus, become advocates for wine, and because of strong family
connections in the Hispanic culture, their passion for wine is passed up to older generations.
For many focus group participants, interest in wine resulted from their interest in cooking.
Food plays an important role in the Hispanic culture. However, there is a general perception
that Mexican food does not pair well with wine (Lackey Shaffer, 2005). In the focus groups,
when asked about wine and food pairing, no one associated wine with Mexican or other Latin
American cuisine. Rather, associations were made with steak, pasta, seafood, or
Mediterranean cuisine. Given the social importance of food in the Hispanic culture, the wine
industry needs to examine ways to emphasize and market wine as a complement to meals.
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7.2. Consumer Survey Findings
7.2.1. Sample Description
The socio-demographic characteristics tested were gender, education, and income. The
sample was almost equally divided between males and females. Respondents of various age
groups - ranging from 21 to 84 years old - participated in the study. Interestingly, the data
were skewed towards younger participants, with one-third of the sample being younger than
30 years old; and cumulatively, almost 60% of the sample was younger than 40 years old.
These survey statistics support the focus group findings in that younger Hispanics constitute
the major force of Hispanic wine consumers.
Respondents had higher levels of education than the general U.S. population. Over forty
percent of the sample had a bachelor college degree or higher, whereas the U.S. Census
Bureau {, 2010 #678} reports that a total of 29.9% of the U.S. population graduated from
college or have an advanced graduate degree. Moreover, among the entire Hispanic
population in the U.S., only 13.9% has earned an undergraduate degree, whereas 13.2% of
respondents reported having a graduate degree. Likewise, the sample had higher income
levels, with almost one-third earning more than $60,000 a year.
7.2.2. Preferences and Wine Consumption Behaviour
RQ2 examined preferences and wine consumer behaviour patterns of Hispanic consumers.
Although Hispanic consumers traditionally are known to favour beer and tequila over wine,
the results of the current study show an equal split between wine and beer as most often
consumed alcoholic beverages, followed by spirits. This, in part, can be explained by the fact
that frequency of wine consumption was used as a screening question at the data collection
points. Respondents who indicated that they do not drink wine at all or drink it very rarely,
were not included in the sample.
The majority (68.2%) of those respondents who participated in the study reported that they
consume wine at least once a week or even more frequently. Six percent reported daily wine
consumption. Slightly over half of the sample reported preferences for red wine, followed by
preferences for white and rosé wines. More respondents prefer dry wines and fewer prefer
sweet wines. Table 1 provides a detailed overview of Hispanic consumer wine preferences
and wine consumption behaviour.
To further investigate wine consumption behaviour, participants were also asked about
situations where they would most likely choose to drink wine over other beverages. The
findings show that the vast majority of Hispanic consumers perceive wine as a drink to be
consumed at home (own or friend’s/ relative’s), rather than in a restaurant or a bar. Even for
special occasion situations or romantic dinners, a relatively small percent of respondents
chose wine as a preferred beverage in those situations.
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Table 1. U.S. Hispanic Consumer Wine Consumption Behaviour (N = 414)
Characteristic
Percent
Which alcoholic beverage do you consume most often?
Beer
31.6
Wine
31.4
Spirits
20.8
Combination of several
16.2
How often do you consume wine?
Daily
6.0
Several times a week
29.8
Once a week
32.4
About once a month
31.7
What type of wine is your favourite?
Red wine
52.7
White wine
27.4
Rosé / Blush wine
11.7
Equal preference
7.0
Other
1.2
Do you prefer wine that is dry or sweet?
Sweet
40.5
Dry
59.5
7.2.3. Wine Purchase Drivers
RQ3 investigated wine purchase drivers of Hispanic consumers. Participants were presented
with a list of factors (compiled from previous literature on wine consumption) and asked to
select the three most important factors that determine their wine purchases. Price was named
among the top three in 70% of cases, followed by an equal split between personal preference
(41.1%) and family/friend’s recommendation (41%). Retail display and media advertising for
wine were found to be the least important factors.
8. CONCLUSIONS AND IMPLICATIONS
The current study offers a profile of the Hispanic wine consumer as a younger, more
acculturated second-generation consumer, who drinks wine fairly frequently, with
preferences for red wine, but also indicating strong preferences for sweeter wines. Wine is
perceived as a drink to be consumed at home, rather than in a restaurant or a bar. Price is the
top purchase driver, followed by personal preferences and family/friend’s recommendations.
The core cultural values of family, food, and social interaction are critical factors in
developing an interest in wine amongst Hispanic consumers. Acculturation levels and
generational status also play significant roles in wine consumption amongst Hispanic
consumers.
A generalized marketing approach is unlikely to be useful to reach the Hispanic wine market.
It is imperative to target this new consumer segment based on its specific needs. Special
attention should be addressed to younger, more acculturated consumers, as they are not only
the primary consumers of wine, but also advocates for wine for their parents and other groups
of consumers. The industry should consider targeting these second-generation, bilingual,
bicultural consumers who tend to draw from a broader array of cultural influences.
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Consumer Knowledge and Preferences for Wine amongst
Visitors to Burgundy
Natalia Velikova
[email protected]
Steve Charters
School of Wine and Spirits Business, Groupe ESC Dijon-Bourgogne, France
[email protected]
Laurence Cogan-Marie
School of Wine and Spirits Business, Groupe ESC Dijon-Bourgogne, France
[email protected]
Abstract:
Purpose - The study aims to develop a profile of Burgundy tourists and to examine visitor
attitudes towards the wines of the region, with the specific emphasis on the effect of visitor
product knowledge on the evaluation of Burgundy wines.
Design/methodology/approach - The samples consisted of Burgundy tourists from the
Anglophone countries. Consumer survey was utilized for data collection. The survey was
distributed both on-site (to current visitors) and on-line (to past visitors).
Findings - Burgundy tourists were found to be older (average age 48) and extremely well
educated. The primary purpose of visit was holiday/vacation for the majority. However, a
moderate number of visitors have come explicitly to visit wineries. Product knowledge level
has an impact on the evaluation of the local wines. More knowledgeable visitors think
Burgundy wines are world class, but of limited variety and tend to be overpriced. While the
least knowledgeable group were mostly first-time visitors, a relatively high percentage in the
somewhat knowledgeable group indicated this was their second visit to Burgundy.
Practical implications - Burgundy local authorities and the wine industry benefit from the
profiling information on their visitors. The results contribute to the understanding on how to
target tourists with different levels of wine knowledge. The industry also needs to make the
least knowledgeable visitors’ experiences in Burgundy educational and enjoyable, which in
turn may spark their interest in wine and intent to revisit the region.
Keywords: Burgundy; wine tourists; subjective knowledge; perceptions of wines
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1. INTRODUCTION
Burgundy is a key French tourist destination, renowned for its history, food, and undoubtedly
wine. Increasingly the local authorities want to employ wine as leverage for tourism. Thus, it
now appears relevant to investigate wine tourism in this region. In part, wine tourism in
Burgundy is one example of the wider and under-researched European offer as a whole.
Additionally, this research investigation allows us to explore how tourists feel about that
specific offer – their expectations, motivations and perceptions, which is evidently important
if a successful tourism proposition is to be sustained.
The geographical context for this research is the Côte d’Or in Burgundy. For many
connoisseurs, the Côte d’Or is what they automatically think of when they consider
Burgundy. The region is a narrow wine producing area (less than 15 km wide and 60 km in
length), which extends southwest from Dijon, the administrative centre of the region. The
two most important wine towns in the region are Beaune and Nuits St Georges. These are the
focal points for wine tourism. Most villages along the route produce wine, and thus are the
home to small domaines. As is common in Europe, wine tourism has not been formally
planned here, but evolved from wine producers' commercial activities. Additionally, as in
other European wine making regions, a number of producers who sell wine at their cellar
doors would deny the notion that they are engaged in wine tourism; instead – they say that
they merely sell wine to visitors. Recognizing the importance (or the mere existence) of wine
tourism as a critical means to make Burgundy wines more accessible and understandable to a
wider audience builds the foundation for the proposed study.
2. CONCEPTUAL CONTEXT
2.1. Profiling Wine Tourists
Researchers have long been approaching wine tourism as a form of consumer behaviour,
where tourists interested in wine purposefully travel to wine destinations. Studies on profiling
wine tourists offer various approaches for the examination of behaviour and characteristics of
wine tourists. Because the current research focuses on the examination of tourist attitudes to
wine (general attitudes and attitudes to Burgundy wines in particular) and their product
knowledge, it takes a three-dimensional model suggested by Charters and Ali-Knight {, 2002
#30} as the framework for the proposed study. The three dimensions are: (a) purpose of visit;
(b) general tourist motivation; and (c) relationship to other tourist activities. For the purposes
of this conference paper, profiling of Burgundy wine tourists will be based the first two
dimensions, as well as socio-demographic characteristics. The third broader proposition on
the relationship to other activities in the region will be discussed in a separate publication.
With regards to detailing wine tourist characteristics, wine knowledge is taken as the focal
point of analysis in the current study. Tourists naturally differ in their levels of product
knowledge. Research shows that these differences largely determine tourist behaviour. The
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importance of product knowledge for wine tourism research is discussed in more detail in the
following section.
2.2. Wine Knowledge
The wine market presents consumers with a vast variety of heterogeneous products. Today’s
consumers are faced with an overwhelming range of information on grape varieties,
appellations, vintages, and wine quality ratings. With the wine market being so multifaceted,
product knowledge is an important factor dictating the decision-making processes undergone
in consumer minds.
The significance of product knowledge in wine purchasing decisions has been studied
extensively {e.g.`, \Dodd, 2005 #43;Gluckman, 1990 #211;Viot, 2012 #812;Aurier, 1999
#516;Viot, 2012 #812;Mueller, 2008 #568}. Previous research has found that highly
knowledgeable consumers are capable of recalling significantly more information and
therefore, make better purchasing decisions than less knowledgeable consumers {Alba, 1983
#27}. Spawton {, 1991 #13} noted that because of the perceived complexity of wine, in many
situations consumers’ purchasing decisions are based on either their knowledge about wine or
on previous experience with it. Dodd’s et al. {, 2005 #43} study on the effect of wine
knowledge on sources of information used by consumers suggested that prior experience with
the product forms the basis for consumer’s knowledge. Knowledge, in turn, is related to
different sources of information consumers rely upon.
Equally, it is now well established in the literature that product knowledge is a significant
factor in motivations and experiences of wine tourists, either directly {Charters, 2002 #30} or
mediated via the dimension of involvement {Getz, 2006 #968}. For example, it has been
noted by Charters and Ali-Knight {, 2002 #30} that Australian consumers seek further
knowledge when they visit a wine region. For more knowledgeable wine tourists, their
motivation to visit a region correlates with their product knowledge, which becomes a key
factor in their desire to taste, learn and buy wine. The less knowledgeable, conversely, are
less focused on tasting, and more on tours and the overall experience of being in the region.
Famularo, Bruwer and Li {, 2010 #969} point out that increasing knowledge has a clear
relationship with the image of wine regions and that, in turn, has an impact on a consumer
willingness to buy wine from the region. Thus in order to target various visitor segments
effectively, it is imperative for the industry to know how tourists with different levels of
knowledge perceive the region and the local wines.
2.3. Burgundy Wine Tourists
According to a personal communication given by the Bureau Interprofessionnel des Vins de
Bourgogne (BIVB) to one of the authors, 30 million bottles of wine were sold at the
domaines in Burgundy during 2011, representing 15% of total production. Beyond the
obvious financial gains of the direct sales, cellar door visitations contribute to the
development of a strong regional brand image. Thus, it is critical for the local authorities and
the industry to have a good understanding of who the visitors are, what motivates them to
visit the region and the cellar doors, and what their perceptions of Burgundy wines are.
Documented evidence on Burgundy tourists is scarce and includes only a few trade reports.
According one such report conducted by ATOUT France {, 2010 #970} , Burgundy wine
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tourists tend to be mature with an average age of 48, generally men, affluent and from outside
the region, with 43% being foreign tourists. They tend to claim three main motives for
visiting the region: to discover the wines and vineyards (44%); the discovery of food,
regional produce and local gastronomy (27%); and the exploration of the region's cultural
heritage (21%). However, beyond these bare statistics little is known about the profile and
expectations of visitors to the region. This study aims to fill this gap in knowledge.
3. PURPOSE
The current study aims to develop a profile of Burgundy wine tourists and to examine visitor
attitudes towards Burgundy wines.
4. RESEARCH QUESTIONS
To achieve the objective defined above, the following research questions were advanced:
RQ1: What is the profile of the Burgundy wine tourist?
RQ2: What are the visitor attitudes towards Burgundy wines?
RQ3: Are there any differences in these attitudes amongst visitors with different
levels of wine knowledge?
5. METHOD
5.1. Research Design and Data Collection
A trade report by ATOUT France {, 2010 #970} revealed that tourists from the Anglophone
countries represent a significant proportion of foreign tourists in Burgundy (e.g., over 15%
from the UK/Ireland and almost 10% Americans). Given the significance of this group, the
current study focused on this population of tourists to Burgundy. For a balanced perspective,
the study incorporated two methods to recruit subjects – on-site and on-line.
On-site, the data were collected via pen-and-paper surveys distributed to English-speaking
tourists at the most popular tourist sites in Burgundy. Preliminary screening of the responses
indicated that the sample included people with various degrees of interest in wine. However,
since wine is the major appeal of Burgundy, it was important to include subjects with more
distinct interests in wine. These people visit the region for professional purposes mainly, but
participate in tourist activities as well. Although this population comprises a lesser proportion
of visitors to Burgundy, it is a very important visitor segment for the region, thus it was
necessary to include them in the sample.
To make sure that these visitors are purposefully reached, an identical survey was developed
in Qualtrics. The URL link was distributed via an invitation email and social media
announcements to a database of professional contacts who have visited Burgundy in the past.
Literature shows that on-line surveys using panel approaches usually attract more
knowledgeable, viewpoint-orientated samples than face-to-face surveys {Duffy, 2005 #952}.
To control for the past visitation provision, the first question in the survey asked if and when
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the respondents visited Burgundy. A skipping logic was built in where participants who did
not visit Burgundy were automatically redirected to a thank-you message at the end of the
survey.
At the time of the current manuscript submission, the study was still undergoing additional
data collection. To date, 100 on-site and 35 on-line surveys have been completed. Thus, the
analysis for the current paper is based on the sample of 135 obtained usable responses. The
available data provides preliminary insights on the topic under investigation.
5.2. Measures
The survey contained several content areas, three of which are relevant to the current study.
The first part included questions on the purpose of visit to Burgundy; tour group size and
composition; general wine preferences and consumption behaviour; along with the sociodemographic characteristics of the sampled population. These characteristics comprise the
basis for a profile of Burgundy wine tourists (RQ1).
The second part was geared toward assessing consumer preferences and perceptions of
Burgundy wines (RQ2). Specific measures included perceptions of Burgundy wines as ‘world
class wines’; and ‘offering a wide range of wine styles’; along with preferences (‘I prefer
Burgundy wines to others’) and perception of wine prices (varying from ‘very under-priced’
to ‘very over-priced’). These measures were worded as a set of statements to which
participants could express their levels of agreement on a 7-point Likert scale anchored
between 1 (strongly agree) and 7 (strongly disagree), thus the lower value indicated a higher
agreement with the statement.
In order to answer RQ3, visitors’ subjective self-assessed knowledge was measured.
Respondents were asked to evaluate their wine knowledge based on the suggested categories
– new to wine; know a little about wine; somewhat knowledgeable about wine; very
knowledgeable; and expert or professional.
6. FINDINGS
6.1. Profile of Burgundy Tourists (RQ1)
The analysis of the socio-demographic characteristics indicated that the sample was almost
equally split between males (50.4%) and females (49.6%). The visitors were highly educated,
with 41.8% reporting that they have earned bachelor’s degrees and additional 45.2% have
earned post-graduate degrees. As has been reported in numerous wine consumer behaviour
studies, wine consumers in general (and wine tourists in particular) tend to be more educated
than the general population. However, the educational levels reported by the Burgundy tourists
are significantly higher than what has been reported previously in wine consumer studies.
The average age of the respondents was 48 years old, ranging from 19 to 80 years old. The
majority of Burgundy tourists are visitors from the US (52.2%), followed the UK (22.5%),
Australia (14.4%), Canada (8.1%), and New Zealand (2.8%). Twenty per cent work in the
wine industry or on behalf of it.
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One the profiling model dimensions, the vast majority (77%) chose ‘holiday/vacation’ as the
primary purpose of their visit to Burgundy. Other reasons included visiting family and/or
friends (11.1%), business and study or temporary work (5.2% equally). Interestingly, 17% of
the respondents indicated that ‘visiting wineries’ was the primary purpose of their visit to
Burgundy. Evidently, an adequate number of wine tourists arrive to Burgundy with a sole
focus on tasting the region’s wines.
Seventy percent were first-time visitors. Amongst repeat visitors, most people visited the
region twice. Visitors travel mostly in smaller groups, with over half traveling with a spouse
or a partner. About 30% travel with friends or with family. Only a small proportion of the
sample (5.2%) travel solo. Ten percent of the visitors travel with children.
The analysis of the respondents’ wine consumption behaviour and preferences revealed that
the vast majority of the sample (71.9%) drink wine at least several times a week. Two-thirds
of the sample indicated preferences for dry red wine.
6.2. Perceptions and Attitudes towards Burgundy Wines (RQ2 and RQ3)
For a proportional comparative analysis amongst visitors with various degrees of wine
knowledge, the sample was split into three groups: (a) new to wine or know a little (41.5%);
(b) somewhat knowledgeable (30.4%); and (c) very knowledgeable/expert (27.4%).
One-way ANOVA was employed to evaluate visitors’ attitudes towards Burgundy wines. The
three groups of different levels of wine knowledge served as thee levels of the independent
variable. The dependent variables were the mean scores on the perceptions of prices
(specifically, whether or not Burgundy wines are priced at too high a level) and attitudes
statements. The ANOVA results are presented in Tables 1 and 2. Means with different
subscripts differ significantly at p < .05 in the Student-Newman-Keuls difference comparison.
Table 1. Visitor Perceptions of Burgundy Wines Prices
Overall, what
do you think
of Burgundy
wines prices?
New to wine or know a little
3.19a
Somewhat knowledgeable about wine
3.45a
Very knowledgeable or expert
3.74b
F
8.13
Sig.
.001
Note: * p < .01 The mean values represent scores on a five-point Likert scale anchored between 1
(very under-priced) and 5 (very over-priced).
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Table 2. Visitor Attitudes towards Burgundy wines
Burgundy
wines are
world class
I prefer
Burgundy
wines to
others
Burgundy
offers a wide
range of wine
styles
New to wine or know a little
1.63a
3.23a
1.94a
Somewhat knowledgeable about wine
1.42a
2.36a
2.58a
Very knowledgeable or expert
1.14b
2.16b
3.03b
F
3.25
5.86
5.25
Sig.
.042
.004
.045
Note: * p < .01 The mean values represent scores on a seven-point Likert scale anchored between 1
(strongly agree) and 7 (strongly disagree).
In terms of demographic differences, the majority of very knowledgeable/expert respondents
were males (70.3% versus 29.7% females); and conversely, the least knowledgeable group
was represented by more females (64.3% versus 35.7% males). The ‘somewhat knowledge’
group was more equally split between males and females (53.7% and 46.3%, respectively).
The most knowledgeable visitors were also found to be significantly younger (average age 41
years old) than less knowledgeable groups, F(2,132) = 4.24, p = .016.
First-time visitors were the least knowledgeable group. Professionals/experts visited
Burgundy many times, for business purposes mainly. Interestingly, 36% in the ‘somewhat
knowledgeable’ group indicated this was their second visit to Burgundy. These are
consumers who possess more than basic knowledge about wine and who chose to come back
to Burgundy. It is possible that it was their first visit to Burgundy that sparked their interest in
wine, which then developed into getting more education about wine and also resulted in
repeat visitations to the region. The industry and the local authorities then need not to
underestimate the least knowledgeable visitors. Instead, it is important to make their
experiences in Burgundy educational and enjoyable to trigger their interest in wine as a
product in general and intent to revisit Burgundy in particular.
7. DISCUSSION
This study, focusing only on English-speaking visitors (thus only about 30% of all visitors to
Burgundy) tends to confirm some of the existing demographic knowledge about wine tourists
in region. Burgundy tourists are older and extremely well educated. However, some other
key points have emerged from the data. Unlike the previous information given by BIVB,
there is an almost equal split in males and females. A high percentage have come in part for
business or study, and 17% stated explicitly that wine is the primary reason for their visit.
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These are also clearly a knowledgeable group of visitors, mostly males in this group, and
younger than less knowledgeable consumers.
As the results clearly indicate, the product knowledge level has an impact on the evaluation of
the wines of Burgundy, and in a paradoxical fashion. More knowledgeable visitors think
Burgundy wines are world class, but of limited variety and tend to be overpriced. Very
knowledgeable consumers are also the most loyal group as they tend to prefer Burgundy
wines to others more than the other two less knowledgeable groups. This offers a clear
paradox. The most knowledgeable consumers think that the range of wines is limited – yet
they still prefer them to other styles and are most positive about their quality. We can
postulate that knowledge that the wines are only dry, and made from one red and one white
variety, limits overall stylistic variation, but nevertheless the stylistic focus is a favourite of
this segment. Equally, a wide knowledge of what is available worldwide reveals that the
wines, for their quality level, are expensive – yet again the people with that knowledge still
choose to drink them in preference to others that are available.
The most knowledgeable are clearly drawn to the wines of the region, they are perhaps one of
their preferred types of wines. Yet they remain clear-sighted about their pricing, which they
find comparatively high. The fact that they wish to explore the region, and drink the wines
remains positive for local producers – but it also presents an inherent weakness. What
happens when this knowledgeable group – who clearly feel experienced in the whole world of
wine – decide that the wines of Oregon, or Central Otago, or another region, are in fact
equally world class? At that point the perceived price levels could act against the region.
8. IMPLICATIONS
This exploratory study offers preliminary findings on the profile of Burgundy wine tourists,
including their purpose to visit and perceptions of Burgundy wines. At a practical level, the
local authorities and the industry will benefit from more information on visitors to the region.
Results of the current study will also contribute to the understanding on how to target wine
tourists with different levels of wine knowledge. At a theoretical level, in terms of expanding
our understanding of how consumers relate to a specific (in this case wine-focused)
destination, there is much, which can be gleaned from the current study. Specifically, in this
study we set out to measure not just the demographics (including tour group size and
composition), but also the deeper motivation for the visit to Burgundy, general wine
preferences and consumption behaviour and the overall perception of the wines of the region.
Crucially, as part of this investigation, was also the understanding of how the level of
knowledge of visitors interacts with their perceptions of the wines of the area.
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evaluation of product information", Advances in Consumer Research, Vol. 10 No., pp.
577-580.
ATOUT France. (2010), Tourisme et vin: Les clientèles françaises et internationales, les
concurrents de la France. Comment rester compétitif ?,
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Aurier, P. and Ngobo, P.-V. (1999), "Assessment of consumer knowledge and its
consequences: A multi-component approach", Advances in Consumer Research, Vol.
26 No., pp. 569 - 575.
Charters, S. and Ali-Knight, J. (2002), "Who is the wine tourist?", Tourism Management,
Vol. 23 No. 3, pp. 311-319.
Dodd, T. H., Laverie, D. A., Wilcox, J. F. and Duhan, D. F. (2005), "Differential effects of
experience, subjective knowledge and objective knowledge on sources of information
used in consumer wine purchasing", Journal of Hospitality and Tourism Research,
Vol. 29 No. 1, pp. 3-19.
Duffy, B., Smith, K., Terhanian, G. and Bremer, J. (2005), "Comparing data from online and
face-to-face surveys", International Journal of Market Research, Vol. 47 No. 6, pp.
615.
Famularo, B., Bruwer, J. and Li, E. (2010), "Region of origin as choice factor: Wine
knowledge and wine tourism involvement influence", International Journal of Wine
Business Research, Vol. 22 No. 4, pp. 362-385.
Getz, D. and Brown, G. (2006), "Critical success factors for wine tourism regions: A demand
analysis", Tourism management, Vol. 27 No. 1, pp. 146-158.
Gluckman, R. L. (1990), "A consumer approach to branded wines", International Journal of
Wine Marketing, Vol. 2 No. 1, pp. 27-46.
Mueller, S., Francis, L. and Lockshin, L. (2008). The relationship between wine liking,
subjective and objective knowledge: Does it matter who is in your 'consumer' sample?
Paper presented at the 4th International Conference of the Academy of Wine Business
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Spawton, A. L. (1991), "Grapes and wine seminar - prospering in the 1990s: Changing your
view of the consumer", International Marketing Review, Vol. 8 No. 4, pp. 32-43.
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Melting Pot or Blended Wine: Does Ethnicity Still Matter in
Understanding Consumer Wine Behavior?
Liz Thach, MW
[email protected]
Janeen Olsen
[email protected]
___________________________________________________________________________
Abstract:
Purpose - The purpose of the study was to explore US wine consumer preferences and
behaviour based on the four ethnic backgrounds of White, Hispanic, Asian, and African
American. This is relevant because in the US certain segments are growing faster than others,
such as the Hispanic segment, yet there is very little information on their wine consumption
behavior, with most wine research and marketing in the US focusing on the White segment.
Design/methodology/approach - An online survey was used to collect data from 1028 US
wine consumers using panel data respondents. SPSS was used to analyse the data to
determine if there were differences between ethnic segments.
Findings - The statistical findings confirm there are differences between the four US ethnic
segments regarding wine preferences and behaviour. The results suggest marketing strategies
and tactics that can be used to connect better with these consumer segments, as well as
opportunities for additional research.
Keywords: Ethnicity, market segmentation, wine preferences, consumer behavior
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1. INTRODUCTION
Linking culture to consumer behavior has been identified as a key to demographic
segmentation for many years (Nachum, 1994; Stayman & Deshpande, 1989; Yavas et al.,
1992). But recently some US marketing experts (JD Power, 2011) have suggested that
demographic targeting regarding ethnic background is outdated because the concept of the
“melting pot” has become a reality. This is particularly true with US Millennials, who
classify themselves as multi-ethnic with as many as five different ethnic backgrounds (Tseng,
2008).
At the same time, other experts suggest that demographics, such as ethnicity, still impact
behavior and must be considered as part of the bigger picture when creating consumer
profiles (Carmichael, 2011). This is the especially the case in the US, where certain ethnic
groups are growing at a much more rapid pace than others, such as the Hispanic market (US
Census, 2010; Nielson, 2012).
When reviewing the impact of consumer demographics on products such as wine, there
have been several studies confirming that national culture and ethnicity play a role in wine
choice and consumer behavior (Hall et al., 1994; Handly and Lockshin, 1998; D’Hauteville,
2003; Roper Starch, 1999). However, many of these studies are older, and the topic has not
been explored as frequently in the past decade.
With this in mind, a research study was designed to examine the impact of ethnicity on
wine choice and behavior. The research involved 1042 wine consumers from all 50 US states,
with a focus on ethnicity as the dependent variable. Ethnicity as conceptualized in this study
reflects both racial and cultural backgrounds. Specifically, we look at White (non-Hispanic),
African American, Asian American and Hispanic segments of the US population. Hispanics
in the United States can be of any racial background (US Census, 2010), but are defined here
by their Latin American or Spanish heritage regardless of race. This study is relevant because
the US is now the largest wine market in the world (Wine Institute, 2014), with forecasted
growth in all segments, but especially among Hispanics (Lapsley, 2013).
2. REVIEW OF THE LITERATURE
2.1 National Culture and Ethnicity Studies Regarding Wine Consumers
There is ample evidence from cross-national research that culture does shape wine
consumption. For example, wine involvement, purchase of imported wines, and
environmental concerns differed between European and North American consumers (Mueller
et al., 2011). Young consumers in Australia and New Zealand appear to be less price
sensitive than US consumers when purchasing sparkling wines (Charters et al., 2011). Italians
emphasize matching food and wine more than US and Australian consumers do, and grape
varietal matters more to New Zealand consumers than Chinese consumers (Goodman, 2009).
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While these cross-national studies did not look specifically at ethnicity within a country, they
do attest to the fact that cultural differences can impact wine consumption.
Previous studies confirm that ethnicity do have an impact on wine consumption
behavior. A study analyzing ethnic differences in Australia between Greek, Italian, German,
and Australian consumers (Hall et al., 1994) showed differences between consumer
motivations and drinking occasions based on culture. For example, the Greek consumers
reported drinking wine to have fun, whereas the Germans consumed wine to be stylish. A
study in Singapore showed that consumers there saw wine as a beverage to be consumed with
Western food (Handly and Lockshin, 1998); whereas studies in China confirm that Chinese
consumers view wine as prestigious drink (Balestrini and Gamble, 2006).
More disturbing studies show that ethnicity and alcohol can have negative effects.
Chartier et al. (2009) examined problem alcohol drinking between African American, White
and Hispanic Americans and discovered that ethnicity impacts risk factors for alcohol use in
adolescents, especially for African Americans. Potential unethical advertising issues were
uncovered in a research study of African American newspapers in America (Cohen, 2011).
The researchers discovered that more alcohol and tobacco advertisements were found in these
newspapers than general audience newspapers, suggested targeting of African Americans
with alcohol and tobacco ads.
An unusual discovery was reported in a recent study by Niesiołowski-Spanò (2015), who
found that ethnicity and tendency to drink certain beverages, such as wine, could be used to
identify ancient societies. Finally, there are other studies that link national culture to wine via
country of origin. Two recent research articles verified that country of origin affects
consumers’ perception and purchase intentions of wine (Moulard et al., 2015; Spielmann,
2015), but these do not necessarily incorporate the variable of ethnicity.
2.2 Statistics on the US Population by Ethnicity
According to the US Census Population Clock in 2015 there are 321 million Americans.
Population projections for the US (Lapsley, 2013; US Census Bureau 2010; Pew Research
2015) indicate that by 2030 Whites will increase from a 2010 level of 246 to 286 million
(14% increase), African Americans from 39 to 48 million (19% increase), Asian Americans
from 14.4 to 23.5 million (39% increase) and Hispanic Americans from 49.7 to 85.9 million
(43% increase).
Currently White Americans, defined as “a person having origins in any of the original
peoples of Europe, the Middle East, or North Africa, and/or “people who reported entries
such as Caucasian or White (US Census Bureau, 2010, p. 2)”, are the majority and make up
around 69% of the population, with African Americans at 11%, Asian Americans around 5%,
and Hispanics at 15%. Hispanics, defined as “a person of Cuban, Mexican, Puerto Rican,
South or Central American, or other Spanish culture or origin regardless of race” (US Census
Bureau, 2010, p. 2), are predicted to have the largest growth rate in the US.
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Interestingly the definition of ethnic categories within the US has changed dramatically
over the years. According to Brown (2015) the US has conducted a census of its population
since 1790, but it was not until 1960 that people could select their own race. Before then, the
census taker determined race. For example, in 1930, census takers were to select one of the
following for race: White, Negro, Mexican, Indian, Chinese, Japanese, Filipino, Hindu or
Korean. Today some of these terms are considering insulting and not legal to use.
Interestingly it was not until 2000 that Americans were allowed to select more than one race
(Brown, 2015).
2.3 US Wine Consumption and Ethnicity
There is not a lot of current or precise information on US wine consumption by ethnic
background. A 2013 Gallup Poll showed that 36% of White Americans and 34% of NonWhite Americans consume wine (Jones, 2013). In 2010 the Wine Market Council released a
segmentation estimating that of those Americans who drink wine at least once a week or
more, 84% are White Americans, 5% African American, 7% Asian Americans, and only 4%
Hispanic Americans.
2.4 Marketing to Hispanics, Asian-Americans and African-Americans
Marketing researchers in the US have spent considerable time analyzing behaviors and
preferences of Americans who are of Hispanics, Asian or African ethnicity. This is especially
true with Hispanics because of their large forecasted growth rate. According to Forbes
Magazine, “Most US-based firms have a significant corporate imperative to attract Hispanic
consumers, given their tremendous demographic and economic importance… (They) will be
the dominant and in many cases the only driver of domestic CPG sales growth (Llopis, 2013,
p. 1).” Nielson (2012) estimates the collective buying power of Hispanics to grow by 50% to
$1.5 trillion by the end of 2015.
According to experts, there are specific tactics required in successfully marketing to the
Hispanic population. They are still more brand loyal than the general American population,
and focused on family and collectivism rather than individualism (Canadian Gov., 2014).
They prefer bi-lingual ads verses Spanish only ads, and it is best to use a hyper local strategy
with advertising and social media focused on towns and cities, verses mass marketing across
the nation using Spanish language (Llopis, 2013). In terms of food and beverage preferences,
1st generation Hispanics prefer traditional tastes and ingredients from their home country,
whereas 2nd and 3rd generation Hispanics like good taste but want convenience and will spend
more to attain it (Canadian Gov., 2014). They enjoy thirst quenchers and sports drinks, and
buy more imported beer than any other ethnic group, though do not drink as much wine
(Mintel, 2012). However this is changing as younger Hispanics are beginning to embrace
wine.
The Asian American market has the fastest rate of growth due to immigration, and also
spends 19% more than the other segments (Nielson, 2013). They are more educated than
other segments (Pew, 2012) and also make more purchases on the Internet. They prefer to
buy well-known brands, and are willing to pay more in order to obtain high quality items
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(Nielson, 2013). They do not feel they are discriminated against as much as Hispanics and
African-Americans in the US and are more apt to marry with other races (Pew, 2012).
African Americans, on the other hand, do report the sting of discrimination and prefer to
only purchase products that include African Americans in the advertising, and/or from
businesses owned by African Americans (Nielson, 2014). They are especially swayed by
advertising that includes African American musicians or artists, and are apt to use social
media and mobile devices to review products (Nielson, 2014). They have the highest poverty
levels of the four segments, but this situation is improving slightly along with an increase in
education levels (Krogstad, 2015).
3. METHODOLOGY
An online survey was developed to collect information regarding American wine
consumer preferences, behaviours, and demographics. It included 35 questions using standard
5-point Likert-type scales, simple rating questions, and short answers. Measures for wine
related behaviours were adapted from previous research. Ethnicity was based on the US
Census categories, White, Hispanic, Asian, African American and also included Native
Americans, Pacific Islanders and Mixed. The survey was beta-tested, and minor revisions
were made.
It was launched on Survey Monkey for a period of 2 weeks in spring of 2015.
Respondents were obtained from panel data provider, Survey Sampling International. Criteria
included that they be wine drinkers over the age of 21 and that the sample must include
respondents from all 50 states.
A total of 1109 surveys were received but due to low number of responses, Native
Americans, Pacific Islanders, and Mixed respondents as well as those not answering the
question were not included in the analysis. The final sample for analysis was 1028 surveys,
including 673 White, 134 Hispanic, 110 Asian and 111 African American responses. The
data were analysed using SPSS, and included descriptive statistics and ANOVAs.
4. RESULTS
In terms of results, wine preferences and behaviour were analysed. Wine preferences
included style, preferred varietals, and taste preferences. For style there were no significant
differences between the four ethnic groups regarding a preference for white, rose, fortified
and dessert wine, but there were with red and sparkling wines. Hispanics prefer red wines
more than Whites (p = .05) and African Americans prefer sparkling wine more than Whites
(p= .05).
However when dissected further into the 12 most popular wine varietals in the US,
according to Nielson (2014) scan data, there were far more differences, especially amongst
the red varietals. Cabernet sauvignon, merlot, pinot noir and zinfandel showed significant
differences between all four groups. For example, with cabernet sauvignon, Asians preferred
it the most and African Americans the least; however with red zinfandel this trend was
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reversed. Varietals which showed no significant difference included chardonnay, pinot grigio
and muscat.
In analysing wine taste preferences, there were some sharp differences, especially with
African Americans who seemed to dislike dry wines and prefer sweet and fruity wines more
than other segments (see Table 1). The percentages down the column indicate the percentage
of each ethnic group that selected the answer. The percentages across the row can be greater
than 100% as respondents were allowed to select as many preferred wine tastes as they
wished. The number below the percentage indicates the actual number of respondents in each
group that selected the answer. The alphabetical letter at the bottom of the box indicates the
other ethnic groups from which the group in question differs. For example, African
Americans differed from Asian and Caucasian Americans in that they were less likely to
select dry wines, with no sugar as a preferred wine choice. Interestingly Hispanics showed
the highest preference for semi-sweet wines. There were no significant differences between
taste preferences for savory, smooth and tannic wines.
Table 1: Significant Differences in Preferred Wine Tastes
In terms of wine behaviour, the topics of motivation, decision-making, and preferred
pricing were analysed. Additional constructs for wine knowledge, involvement and variety
seeking were included, but not reported here due to space limitations. In terms of motivations
to drink wine, the results showed that Whites were more apt to drink because they liked the
taste of wine, whereas African Americans scored higher for romance, and Asians for health
reasons.
For decision-making respondents were asked to select all variables they considered
when making wine purchases (see Table 2). All segments appear to be in agreement on brand
and price as the two most important considerations, and state and region as not as important.
However, significant differences appeared with varietal choice and country, which were not
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as important to African Americans as the other groups, and with vintage, which was quite
important to Asians. Medals, though scoring lower, were more important to Asians and least
important to African Americans. Hispanics were more concerned about alcohol level than
other groups.
Table 2: Wine Decision-Making
In terms of pricing, when buying wine to drink at home the most common price point for
all segments was $10 to 15, but when the data were analysed to see which segment spent
more than this, 44% of Asians spent more than $15 per bottle to drink at home followed by
36% of Hispanics, 33% of African Americans and 31% of Whites. At a restaurant the
common price points for all segments was $25 to 35 per bottle, with Asians again spending
more than the other segments at 37%. However, it should be noted that 24% of the sample
reported they only buy wine by the glass at a restaurant with the most common price for all
segments at $7 to 10. When analysed by segment, 29% of Asians spent more than $10 for
wine by the glass, followed by Hispanics at 25%, African Americans at 23% and Whites at
17%.
5. DISCUSSION, LIMITATIONS AND CONCLUSIONS
The results indicate that American wine consumers may be moving towards the concept
of a “melting pot” with similar wine preferences and behaviors on several dimensions;
however there are still some marked differences. This research shows that all four ethnic
segments are in agreement on preferences for white, rose, fortified and dessert wines, and
generally agree on white varietals, but red and sparkling wines signal differences of opinion.
Also wine taste preferences vary by ethnic background, with African Americans preferring
sweet and/or more fruity wines, Hispanic leaning towards semi-sweet, and Whites and Asians
showing a preference for drier style wines.
There were also similarities in wine decision-making and pricing, with all four segments
identifying brand and price as the most important decision categories and the average price
point of wines to drink at home/restaurant as quite similar. However, differences did appear
at a more granular level, as Asians appear to be willing to pay more for wine – supporting the
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research on their buying habits (Nielson, 2013), - whereas Whites report spending less
money.
For larger domestic wine brands, this research suggests that national marketing
campaigns should emphasize brand and price, but highlight differences in taste profile to
match the needs of the different segments, especially with red and sparkling wines. The
literature review also emphasizes the need for ads to show a diversity of consumers from all
four segments, and to consider using multi-languages such as English, Spanish, and Mandarin
on the label. This is a practice that is common in other wine growing regions, but has not yet
been adopted much in the US. For smaller wine brands, or national brands that want to focus
on a specific region of the us, the concept of “hyper-local marketing” should be considered,
because this research highlights more detailed differences between the ethnic segments. For
example, if a small winery wants to focus on the African American market in Georgia and
Alabama, they should identify taste preferences and varietals in that market, and use
advertising that highlights diversity. The fact that sophisticated data mining is now available
to profile consumer desires in a specific region makes this type of hyper-local marketing
more feasible. Also wineries that are owned or operated by a Hispanic, Asian, or African
Americans should emphasize this fact in all communications. Related to this is an opportunity
to focus high-quality wine brands on the Asian market that appears to be willing to spend
more on prestigious wine.
There are several limitations that suggest opportunities for additional research. The fact
that the data was acquired from household panels means it is not truly representative, and
therefore cannot be generalized across the US. Ideally a random sample of US wine
consumers would be desirable in the future. Conversely, this research provides quantitative
data, but does not provide the rich detail that a qualitative study of US wine consumers based
on ethnic background would provide. Conducting in-depth interviews with wine consumers
from the different ethnic backgrounds to understand more about why they prefer certain
styles of wine and their purchasing rationale would be informative.
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How important is the carbon claim in Generation Y Italians’ wine choice?
Roberta Capitello
[email protected]
Lara Agnoli
[email protected]
Steve Charters
Groupe ESC Dijon Bourgogne, France
[email protected]
Diego Begalli
[email protected]
Abstract:
Purpose - In the last decade, the issue of global warming has led scholars to increase their
attention on carbon-related claims. Many studies are devoted to understanding their role on
consumer perceptions. However, research experiments usually compare carbon claims with
the other social claims, overshadowing their influence on choice. This paper aims to analyse
the role of the carbon claim in driving consumer choice, measuring consumer utility and
willingness to pay when the carbon claim is conveyed on a wine label, combined with other
product attributes.
Design/methodology/approach - The study focuses on Italian Generation Y. It analyses
consumers’ stated choices of wine applying a Discrete Choice Experiment. Five attributes
were identified as the main characteristics of a bottle of wine: label style, brand, guarantee
label, back label information and price. Consumers were asked to choose the preferred bottle
of red wine to drink during a meeting with friends in 12 choice sets. A structured
questionnaire was online submitted through Facebook. The final survey sample consists of
982 respondents. Latent Class Choice Models were applied.
Findings - The seven-class solution was chosen. About 4 young individuals in 10 are driven
by the carbon claim in their choice or willing to pay for it. Wineries ability to obtain a
premium price from this claim is conditioned by the linkages of this cue with the other
product characteristics, like a fashionable wine with a contrasting label, a traditional wine
focused on the winemaker, and a popular wine, easy to understand, for an occasional and
price sensitive consumer.
Keywords: Carbon Claim, Generation Y, Latent Class Choice Models, Market Segmentation
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1. INTRODUCTION
The decision-making process of the consumer is increasingly complex nowadays, because
many choice variables come into play. These are not only linked to the manifold intrinsic and
extrinsic product characteristics determining the perceived quality of a product, but they are
also connected to consumer characteristics, and the consumer’s social and psychological
sphere has become pivotal when choosing a product.
In this context, on the one hand, a more and more important segment of consumers is
increasing its attention to ethical and environmental issues, with a strong impact on food
choice (Frewer and van Trijp, 2007). On the other hand, businesses are implementing
communication strategies designed to increase their appeal among this segment and
communicate their corporate social responsibility.
Social claims attesting the social commitment of a business are increasingly significant for
food products, and their impact on consumer perception and choice are the focus of much
research. Organic claims are the most analysed social claim in the literature, given the growth
in appeal of organic production for consumers in the last decades and its legal recognition at
European legislative level.
In the last decade, the issue of global warming has led scholars to increase their attention on
carbon-related claims. Much research is devoted to understanding the impact of the carbon
footprint or a carbon claim on consumer perceptions, especially in comparison or competition
with the other social claims. This paper is focused on the carbon claim and intends to analyse
its role in wine consumer choice, when labelled together with the other product attributes on
the bottle.
Carbon claims, also called ‘carbon footprint’ or ‘carbon zero claim’ by scholars (Pomarici
and Vecchio, 2014), attest different kinds of businesses’ commitment to reduce CO2
emissions. In recent years, many marketing scholars in all fields and countries have been
focusing studies in understanding the impact of such a claim on consumer choice behaviour.
Many studies are focused on food consumption, pointing out the minimal role played by the
carbon claim in consumers’ choice. Hartikainen et al. (2014) showed that although the term
‘product carbon footprint’ is familiar to many Finnish consumers’, there is a substantial
misunderstanding concerning its meaning. They highlighted positive attitudes towards carbon
claims, but this information became meaningful only when other purchasing criteria, like
price and taste, are satisfied. Sirieix et al. (2013) analysed the impact of social claims on the
consumer of fruit and vegetables from the UK, through focus groups. They highlighted little
interest in the carbon claim, due to the lack of knowledge about this claim and the issue of
global warming by the average consumer. Onozaka and McFadden (2011) analysed US
consumers of apples and tomatoes and the impact of social claims on their choice through a
discrete choice experiment. They highlighted the negative impact of the carbon claim, which
is however mitigated when it is associated to more well-known claims, like the organic one.
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Another study by Mueller Loose et al. (2013) analysed the importance of social claims,
together with the other packaging attributes, in the choice of oysters by Australian consumers
through a discrete choice experiment. In general, social claims appeared to have little
importance on choice, and a brand attesting the health benefits of oysters is preferred to the
carbon claim. Instead, Vanclay et al. (2011) demonstrated the importance of business
commitment in reducing CO2 emissions for consumers, analysing the impact of the carbon
claim at the sales point. They labelled a group of products with carbon claims of different
colours, according to the degree of commitment of producers in reducing CO2 emissions. The
experiment involved a shop and many products and brands. Results showed that sales of
products labelled with the claim in green, attesting the highest reduction of emissions,
increased by 6%, while products labelled in black faced a reduction of 4% in sales.
Concerning wine, Mueller and Remaud (2010) highlighted the little importance of social
claims in Australian consumer choices; the role of the carbon claim is overshadowed by the
other claims, depressing the utility for some segments of consumers. Mueller and Remaud
(2013) tested the impact of many social claims on wine stated choices by consumers from
UK, France, Germany, US and Canada, pointing out that on average, the carbon zero claim
showed the lowest level of trust and highest level of distrust compared to the other social
claims, and this also occurs in the majority of markets. Pomarici and Vecchio (2014)
analysed the impact of carbon claim in comparison with ethical and a social brands on Italian
Generation Y wine choice, highlighting that older females living in an urban area are more
willing to buy a wine labelled with the carbon claim.
The literature analysis reveals some limitations, given that many studies analysing the impact
of social claim on consumption choices do not take the other product characteristics into
account or consider social claims as mutually exclusive in the choice experiment, leading to
an underestimation of the importance of the carbon claim, overshadowed by other most
known claims.
3. OBJECTIVES
The purpose of this research is twofold:
1) to analyse the role of the carbon claim in driving consumer choice, measuring consumer
utility and willingness to pay (WTP) when the carbon claim is conveyed on a wine label,
combined with other product attributes;
2) to understand if heterogeneity in carbon claim evaluation occurs, and therefore the power
of this claim in differentiating the product.
This study focuses on Italian young consumers from 16 to 37 years old, the so-called
Generation Y (Bakewell and Mitchell, 2003). The literature highlights their environmental
commitment (Lee, 2008). Generation Y is expressing its own cohort dynamics concerning
wine preferences, also in a traditional producing and consuming country like Italy (Mueller
and Charters, 2011). This can give a useful insight into product assessment by young
consumers and into product differentiation practices to be adopted by wineries to meet the
expectations of this target.
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4. METHODOLOGY
This study analyses consumers’ stated choices of wine applying a Discrete Choice
Experiment (DCE) (Louviere and Woodworth, 1983).
Different product attributes and levels are combined into hypothetical situations to build a
choice scenario, asking consumers to choose the preferred bottle of red wine to drink during a
meeting with friends. This scenario represents the preferred wine consumption situation for
Generation Y (Mueller and Charters, 2011).
The experiment was built drawing from previous studies applying discrete choice and
analysing wine cues in consumer choice (Mueller et al., 2010; Orth and Malkewitz, 2008),
and an exploratory in-depth interview amongst a sample of young consumers. Five attributes
were identified as the main characteristics of a bottle of wine: label style, brand, guarantee
label, back label information and price. Each of them was described through different levels
reflecting the Italian market of superpremium and ultrapremium red quality wines: minimal,
natural, contrasting or sophisticated labels for label style; indication of winery name, product
name, vineyard name or social media domain for brand; carbon claim, Protected Designation
of Origin (PDO) or a coalition logo (like ‘Famiglie dell’Amarone d’Arte’) for guarantee
label; indication of some information about terroir (soil characteristics, traditionalism of
production process, family history and grape typicality) for back label; and four price levels
(8.90, 13.90, 18.90 and 23.90 euros/750 ml bottle).
Invented brands and labels were included to avoid distorting the importance of levels and
attributes because of the consumer experience.
An orthogonal design was adopted and two blocks composed by 12 choice sets each resulted
(Louviere and Woodworth, 1983). Every set consisted of four bottles, graphically represented
simulating their display on a wineshop shelf. Some questions about respondents’ sociodemographic characteristics and wine consumption behaviour were included in the
questionnaire.
The questionnaire was online submitted through the Facebook fanpages of Italian
Universities, associations of young people and wine lovers in November 2013. The final
survey sample consists of 982 respondents, 52.7% of them are women. Most of them still
study (60.6%) and live with their parents (73.3%). Workers cover 47.5% of the sample. For
most respondents, wine consumption occurs occasionally.
Latent Class Choice Models were applied (Greene and Hensher, 2003) and the seven-class
solution was chosen as the preferred one. Respondents’ socio-demographic and behavioural
characteristics were included as covariates in the model and their effect was estimated in the
seven latent classes.
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5. RESULTS
Latent class model estimated the importance of the different attributes (part-worth utilities)
and levels for the seven latent classes (LCs). The characteristics of the individuals with
highest probability of belonging to each LC have been estimated (Table 1).
The analysis highlighted the heterogeneity of Generation Y Italians’ choice. LC1 and LC2 are
mainly driven by label style, while other latent classes are price-driven (LC1, LC3 and LC7)
and others are more attracted by back label information (LC4 and LC5) or by a guarantee
label (LC6). Brands generated some utility especially for LC2, LC5 and LC6.
LC1, the largest segment, is most likely to contain females, whose choice is fashion driven
and the carbon claim is important because it contributes by generating product originality.
LC2 is mainly composed by males, with high education, living with parents and is driven by a
natural label style and the winemaker brand. A label posting the carbon claim has a negative
impact on their choice, because they prefer product origin attested by the PDO brand.
LC3 is mainly composed by low educated females. They aspire to luxury wines and the
carbon claim does not meet their needs.
LC4 is composed by low-educated young individuals with little experience of wine. They
look for information, and therefore they are interested in the back label. Little importance is
played by guarantee label for this class, and the carbon claim does not have impact on its
utility.
Consumers in LC5 are traditional wine consumers for many aspects, they were introduced to
wine consumption by family, mainly consume wine during meal and buy it in wineries. They
look for a brand attesting producer’s adherence to an association certifying compliance with
specific production rules and winemaking culture, which become more important than the
designation of origin itself. The carbon claim seems to have no impact on the choice of this
class.
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Table 1 - Attribute and level importance for the seven latent classes
Attributes
Part-worth
utilities (%)
Level importance*
Characteristics of
individuals with the
highest belonging
probability
Sample share
(%)
Females
26.2
Males
17.0
Latent Class 1: Fashion-driven consumers
Label style
25.9
+ contrasting;− minimal; − sophisticated
Price
25.7
+ 13.9 euros; + 18.9 euros; − 23.9 euros
Back label information
21.4
+ soil; + production process
− grape variety; − family history
Guarantee label
18.6
+ carbon claim; − coalition brand
Brand
8.4
+ product; + vineyard
Latent Class 2: Brand origin-driven consumers
Label style
47.8
+ natural; − minimal; − sophisticated
Brand
24.0
+ winery; + product; + vineyard; − social
Price
15.1
+ 13.9 euros; + 8.9 euros
Well-educated
Living with parents
− 18.9 euros; − 23.9 euros
Guarantee label
8.5
+ PDO; − carbon claim
4.6
− soil
Latent Class 3: Consumers aspiring to luxury wines
Price
28.1
Females
24.9
+ family history; − grape variety; − soil
Low level of education
Brand
16.6
+ vineyard; + product; +winery; − social
Label style
15.6
+ natural; − minimal
Guarantee label
14.8
+ PDO; − carbon claim
14.7
Latent Class 4: Information seeking consumers
61.6
+ production process; − grape variety; − soil Low level of education
Price
16.0
+ 13.9 euros; + 18.90 euros;
12.8
Little wine experience
− 8.90 euros; − 23.90 euros
Label style
10.8
+ natural; + contrasting; − minimal
Brand
6.0
− social
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Guarantee label
5.7
+ PDO
Latent Class 5:Typicality-driven consumers
42.7
+ grape variety; − soil
Brand
22.2
+ vineyard; + product; − social
Price
15.6
+ 13.9 euros; + 8.9 euros;− 23.9 euros
Guarantee label
13.1
+ coalition; − PDO
Label style
6.5
+ natural
Introduced to wine
11.2
consumption by family
Consumption during meal
Purchases by wineries
Latent Class 6: Consumers looking for a traditional product
Guarantee label
38.7
+ PDO; − carbon claim; − coalition
Brand
22.3
+ product; + winery; − social
Price
15.3
11.9
+ production process; − family history
Label style
11.8
+ natural; − minimal
High level of education
10.2
Living outside family
Latent Class 7: Price-driven consumers
Price
71.9
+ 8.9 euros; +13.9 euros
− 18.9 euros; − 23.9 euros
Very young males
8.0
High level of education
Guarantee label
10.2
+ PDO; + carbon claim; − coalition
Living outside family
Brand
5.3
− social
Occasional consumers
7.3
− soil
Label style
5.3
+ natural
Outside meal
* Only significant levels are included (p<0.01, p<0.05 and p<0.10) in descending order of importance. The symbols + and – respectively
indicate the positive and negative effect on consumer utility.
LC6 includes well-educated individuals living outside family. Their choice is driven by the
guarantee label, but they seek the warranties provided them by a designation of origin brand,
and the carbon claim plays a negative role on their utility.
LC7 is completely price driven, and this could be justified by the dominant socio-economic
and behavioural characteristics of people belonging to it: namely very young and welleducated males, living outside family, occasional wine consumers not usually with meals.
Among guarantee labels, they prefer the PDO brands. However, positive signals in favour of
the carbon claim emerge from this cluster, given the positive relation between utility and this
attribute level.
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Table 2 shows LCs’ WTPs for each attribute level.
Table 2 – Consumer WTP for attribute levels (euros)
Latent classes
Attributes and levels
LC1
LC2
LC3
LC4
Sophisticated
− 8.27
− 12.50
− 5.20
− 14.39
Contrasting
+ 21.25
− 9.53
LC5
LC6
LC7
− 12.60
− 0.71
− 1.73
− 22.55
− 0.59
Label style
Natural (reference level)
Minimal
− 15.31
− 10.21
− 19.41
− 1.26
− 27.37
− 1.06
− 6.72
− 10.39
− 12.05
− 5.20
-43.38
− 0.59
Brand
Vineyard name (reference level)
Social name
− 9.89
Winery name
− 11.35
− 2.37
− 7.03
Product name
+ 9.33
Soil (reference level)
Family history
− 23.68
+ 17.38
+ 55.71
+ 4.73
+ 0.71
Grape variety
− 23.36
+ 3.58
+ 41.32
+ 10.88
+ 1.06
Production process
− 6.00
+ 0.94
+ 8.60
+ 107.41
+ 6.47
+ 21.30
Carbon claim
+ 15.57
− 2.81
− 10.21
− 10.04
+ 1.58
− 93.14
Coalition brand
− 6.33
− 5.73
− 7.36
+ 5.05
− 92.99
+ 0.71
Guarantee label
PDO (reference level)
− 1.06
Given the different sensitivity of the LCs to price, the sample has been divided and seven
MNL models have been estimated, setting different relations between price and utility for
each LC.
LC1 consumers confirm their attraction toward the carbon brand, being willing to pay more
for a bottle presenting such a social claim than for a PDO branded bottle. Despite LC7
showed a preference for the carbon claim, this is not reflected in the analysis of its WTP,
confirming its high price sensitivity. Conversely, the results from LC5 suggest a definite
WTP of 1.58 euros more for this environmental sustainable claim than for the designation of
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origin brand. A positive willingness to pay also for the coalition brand shows the combined
utility drawn from these claims. The other latent classes are more willing to pay for a bottle of
PDO wine than for a bottle of environmental friendly wine.
6. DISCUSSION
This research highlights the preference context in which the carbon claim acts for wine,
characterised by low price sensitivity, in line with the literature about Generation Y
consumers, defining them as conspicuous consumers (Noble et al., 2009).The territorial brand
has the strongest positive influence among the guarantee labels. PDO brand is preferred by
four classes, namely more than half of the sample, with the carbon claim depressing the
utility for three of them. This may suggest that wine regions’ efforts to produce typical
sustainable wines could not often be rewarded with an added value by some consumer
segments.
However, a segment of young people influenced by the carbon claim emerges: about 4 young
individuals in 10 are driven by this claim in their choice or willing to pay for it, partly
confirming previous studies about the sensitiveness of Generation Y to the environmental
issues (Lee, 2008).
Three profiles of young individuals potentially interested in a bottle labelled with the carbon
claim emerge by this study. In line with findings of Pomarici and Vecchio (2014), for some
segments of females, especially the ones attracted by fashion, the carbon claim becomes an
important driver both for choice and willingness to pay. The carbon claim also results in
significant willingness to pay terms for the most traditional consumer segments. Additionally,
in terms of utility, the carbon claim assumes a positive role for the segment most sensitive to
price.
Therefore, three consumer profiles can be linked to three different uses of the carbon claim in
a product differentiation process:
1. The carbon claim to enhance a fashion wine: for a consumer using all the attributes in
assessing the modernity of a wine, there is a preference of the carbon claim to the other
guarantee labels because it is the most able to meet this expectation;
2. The carbon claim to support a terroir wine: for a consumer not using the carbon claim in
product assessment, but showing a willingness to pay for it when compared to a PDO wine
and in combination with a coalition brand;
3. The carbon claim to support a pop wine: for a consumer with little product expectation,
the carbon claim and the PDO represent easily perceived cues when choosing a product.
However this does not lead to a willingness to pay more for the carbon claim.
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7. CONCLUSIONS
This study provides wineries with relevant suggestions in terms of product strategies, to have
positive market feedback to their environmental sustainability and corporate social
responsibility. It highlights the carbon claim importance for some segments of young
consumers, who positively assess it as an alternative to the PDO brand. The emergence of
different consumer profiles leads the research to highlight the capacity of the carbon claim in
creating product differentiation when it is combined with the other wine attributes positively
assessed by consumers. Wineries ability to obtain a premium price is conditioned by the
linkages of this cue with the other product characteristics, like an original and contrasting
label to attract a consumer looking for fashionable wine, a traditional wine focused on the
winemaker for a consumer attracted from the intrinsic typicality of the product, and a popular
wine, easy to understand, for an occasional and price sensitive consumer.
8. REFERENCES
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styles", International Journal of Retail and Distribution Management, Vol. 31 No. 2, pp.
95-106.
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Publishing, Cambridge, UK.
Greene, W.H. and Hensher, D.A. (2003), "A latent class model for discrete choice analysis:
contrasts with mixed logit", Transportation Research Part B: Methodological, Vol. 37 No.
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Hartikainen, H., Roininen, T., Katajajuuri, J. M. and Pulkkinen, H. (2014), "Finnish
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Mueller, S., Osidacz, P., Francis, I.L. and Lockshin, L. (2010), "Combining discrete choice
and informed sensory testing in a two-stage process: Can it predict wine market share?",
Food Quality and Preference, Vol. 21 No. 7, pp. 741-754.
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environmentally conscious? Robustness of latent preference segments over time", paper
presented at the 5th International Conference of the AWBR, 8-10 February, Auckland,
New Zealand, (NZ), available at: http://academyofwinebusiness.com/wpcontent/uploads/2010/04/MuellerRemaud-Are-Australian-wine-consumersenvironmentally-conscious.pdf (accessed 23 July 2015).
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on consumer food choice: A cross-cultural comparison", British Food Journal, Vol. 115
No. 1, pp. 142-166.
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Onozaka, Y. and Mcfadden, D.T. (2011), "Does local labeling complement or compete with
other sustainable labels? A conjoint analysis of direct and joint values for fresh produce
claim", American Journal of Agricultural Economics, Vol. 93 No. 3, pp. 693-706.
Orth, U.R. and Malkewitz, K. (2008), "Holistic package design and consumer brand
impressions", Journal of Marketing, Vol. 72 No. 3, pp. 64-81.
Pomarici, E. and Vecchio, R. (2014), "Millennial generation attitudes to sustainable wine: an
exploratory study on Italian consumers", Journal of Cleaner Production, Vol. 66 No. , pp.
537-545.
Sirieix, L., Delanchy, M., Remaud, H., Zepeda, L. and Gurviez, P. (2013), "Consumers'
perceptions of individual and combined sustainable food labels: a UK pilot investigation",
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Vanclay, J.K., Shortiss, J., Aulsebrook, S., Gillespie, A.M., Howell, B.C., Johanni, R., and
Yates, J. (2011), "Customer response to carbon labelling of groceries", Journal of
Consumer Policy, Vol. 34 No. 1, pp. 153-160.
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Australian Consumers’ Perceptions of Champagne and
Other Sparkling Wine: An Exploratory Study*
Naomi R. Verdonk, University of Adelaide, Australia
[email protected]
John W. Wilkinson, University of South Australia, Australia
[email protected]
Julie A. Culbert, University of Adelaide, Australia
[email protected]
Renata Ristic, University of Adelaide, Australia
[email protected]
Melissa J. Lane, University of South Australia, Australia
[email protected]
Karma L. Pearce, University of South Australia, Australia
[email protected]
Kerry L. Wilkinson, University of Adelaide, Australia
[email protected]
Abstract:
Purpose: To provide further insight into Australian consumers’ preferences for different sparkling wine
styles, including champagne.
Design/methodology/approach: Focus groups – including tastings – were conducted to identify
consumers’ knowledge of, and preferences for, champagne and other sparkling wine.
Findings: Personal taste was found to influence the choice of a sparkling wine rather than another type
of alcoholic beverage, and selection of a particular style of sparkling wine (such as champagne, some
other sparkling white, or sparkling red). Country or region of origin, particularly with respect to the
product being French, was found to be important across all four focus groups, although often linked to
the product being champagne. Brand image and reputation were found to influence purchase decisions
across all four focus groups, sometimes linked to consumption occasion. Advice or recommendations,
and expert reviews also were found to influence purchase decisions. Consumption occasion also was
found to influence purchase decisions across all four groups. Price was found to influence the brand and
style of sparkling wine purchased across all four groups. A relatively high price was found to be a
barrier for some participants, while other participants were found to avoid sparkling wines below some
particular price. Analysis of these findings enabled the development of a preliminary model of buyer
behaviour relating to sparkling wine.
Practical implications: Findings suggest that a producer could benefit from marketing a range of
sparkling wines to cater to different tastes and different occasions; and confirm the importance of
marketers pursuing opportunities to obtain and promote favourable expert reviews for their sparkling
wines, and of identifying and promoting regional distinctiveness.
Keywords: Champagne, sparkling wine, consumer perceptions
This study is part of a larger project, ‘Objective measures of Australian sparkling wine style and quality’,
funded in 2013 by a grant from the Grape & Wine Research & Development Corporation, now Wine Australia.
*
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BACKGROUND
Sparkling wine constitutes a small but significant proportion of total Australian wine
production, with annual production reaching 37 million litres in 2012 (Wine Australia 2012).
The Australian sparkling wine product range is diverse, comprising white and pink Moscato,
and white, rosé and red sparkling wines, as mono-varietals and blends, and covering a wide
price range. However, the relative importance of each style to Australian consumers remains
unclear, since there has been little published research focusing on sparkling wine consumers
(Charters 2005, Fountain and Fish 2010). There also have been few studies regarding the
wine knowledge, generally, of Australian consumers (Johnson and Bastian 2007).
Consumer- and other marketing-related research typically has focused on table wine rather
than sparkling wine (e.g., Verdú Jover et al. 2004, Charters and Pettigrew 2008), although
some studies have focused specifically on champagne (e.g., Charters 2009, Morton et al.
2013).
This study aims to provide additional knowledge about consumer behaviour and, specifically,
further insight into Australian consumers’ preferences for different sparkling wine styles. The
study addresses a gap in knowledge regarding champagne and other sparkling wine
consumption given that ‘little [prior research] examines in detail how the consumer perceives
the product, or how the wine is evaluated at consumption’ (Charters 2005, p. 54). Additional
insight should enable the development of strategies to influence purchasing decisions and,
consequently, to increase sales to existing and emerging sparkling wine consumers.
LITERATURE REVIEW
Judica and Perkins (1992) conducted a means-end analysis of consumers’ reasons for
purchasing sparkling wine, based on in-depth individual interviews of 27 consumers recruited
through liquor stores in an affluent college town in the United States. For light users, five
attributes (‘taste’, ‘brand name’, ‘dry taste’ or ‘sweet taste’, ‘high price’) were found to be
linked to a common consequence, ‘enjoyable’. Several consequences (of the five attributes
plus a sixth, ‘low price’) were found to be linked to a common higher-level consequence,
‘reward’. In turn, reward was found to be linked to several psychological consequences
(‘sophisticated image’, ‘socialize better’, ‘impress others’) and end-values (‘self-esteem’,
‘family life’, ‘accomplishment’). For heavy users, the same six attributes plus ‘carbonation’
were found to be linked to a more scattered set of consequences, with more connections
between factors; end-values comprising those found for light users plus ‘belonging’. These
researchers also found that, among participants in their study, heavy users typically indicated
a willingness to pay a higher price for a dry, high quality sparkling wine because of a belief
that dry wines are of a higher quality than sweet wines and, therefore, are more
‘sophisticated’; while light users were more likely to consume sweet sparkling wine because
of its greater ‘likeability’ at a lower price. Participants indicated that a special event was the
most frequent occasion for consumption of sparkling wine, and most also indicated that price
therefore was not a primary concern. Most seemed to have limited brand awareness, and an
unwillingness to take a risk with an unknown brand due to the social nature of consumption.
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For heavy users, sparkling wine was viewed as a symbol, the ‘sophisticated image’ of a brand
being a psychological consequence as important as the ‘reward’ of satisfaction.
In a study of sparkling wine consumers, Mueller (2006, p. 4) identified six consumer
segments from cluster analysis of data obtained from 1029 respondents. For ‘Undemanding’
consumers, flavour type and price are the most important attributes when selecting a
sparkling wine. For ‘Brand-conscious’ consumers, flavour type and brand are the major
attributes. The ‘Ambitious’ segment ‘comprises mostly young, wine-interested consumers
with a low subjective product knowledge’, who have difficulty understanding special wine
attributes and therefore use country-of-origin as ‘surrogate variables’. For the ‘Region-oforigin conscious’ segment, flavour type, price, brand and regional origin are the most
important product attributes. For ‘Vine variety-conscious’ consumers, flavour type, price,
brand and vine variety are the most important attributes. The ‘Experts’ segment is unique in
identifying ‘all seven product characteristics as almost equally important for their purchase
decision for a normal occasion’, also displaying ‘a more than average interest for and
subjective knowledge of wine’. Members of this group have ‘the highest average age,
education and income’ and purchase from ‘a wide variety of distribution channels’, including
directly from winemakers.
Using econometric modelling, Lee and Sumner (2013) estimated the relationships between
different factors and the price of French- and United States-produced champagne and other
sparkling wine sold within the United States. They found higher Wine Spectator tasting
scores to be associated with significantly higher prices for all types of sparkling wine. They
also found a significant relationship between region and price for US-produced sparkling
wine; while the place name ‘Champagne’ was linked to a substantial price premium.
However, inappropriate use of the word, ‘Champagne’, on the label of United States
sparkling wine was found to be associated with a significantly lower price relative to other
sparkling wine.
Tomić and Cerjak (2014) conducted an online survey of 273 Croatian consumers of sparkling
wine, confirming the low frequency of sparkling wine consumption, especially outside the
home, and finding intrinsic characteristics (taste, smell) and the price–quality relationship to
be more important to consumers than visual appearance, expert reviews and wine awards.
They also found that sparkling wine consumption was mainly related to celebrations and
special events, with a smaller proportion of consumers drinking sparkling wine as an aperitif.
Within an Australian context, there have been very few studies of consumer preferences
regarding sparkling wine, although it has been suggested that many young consumers drink
sparkling wine because of its sweetness, with some selecting sparkling wine for special
occasions such as romantic dinners (Edwards and Spawton 1990). As part of a larger study,
Charters (2005) assessed the engagement of Australian consumers with sparkling wine. This
involved focus groups (including tastings of four sparkling wines) and interviews with 60
consumers from across Australia. According to participants, their key motivations were
sparkling wine being a ‘symbol of celebration’ and being ‘strongly related to the evocation of
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memories’ (ibid., p. 57). Some participants – mainly low-involvement consumers – stated
that they disliked sparkling wine, primarily due to its taste (e.g., ‘too dry’) or effervescence.
Fountain and Fish (2010) conducted exploratory research into the experiences and
perceptions of young adults relating to sparkling wine. The study involved four focus groups
in Christchurch, New Zealand, comprising 31 participants, and three in Melbourne, Australia,
comprising 19 participants. The 34 female and 16 male participants were aged from 18 to 28
years. The researchers found that ‘wine was not the primary alcoholic beverage’ for any male
participants, although several claimed to drink more wine than previously and to drink wine
rather than other alcoholic beverages in some situations. Conversely, most female
participants ‘named wine their first, or equal first, alcoholic beverage of choice’ (ibid., pp. 34)
Ritchie et al. (2011) investigated how young adults engage with champagne and other
sparkling wine in hospitality establishments in Australia, New Zealand, South Africa, the
United Kingdom and the United States. They found that only UK participants were clearly
aware of differences between champagne and other sparkling wine. However, while the terms
‘champagne’ and ‘sparkling wine’ often were used synonymously in other countries, the term
‘champagne’ was mainly used to refer to sparkling wine of high quality. Participants
perceived two broad types of sparkling wine: high quality product, possibly exclusive and
expensive, and ‘fun, fizzy, inexpensive wine’ (ibid., p. 3).
In summary, there has been limited research regarding consumer engagement, perceptions
and preferences relating to sparkling wine. Based on this research, it seems that (1) there are
different consumer groups (potentially comprising different market segments) with very
different perceptions, preferences and consumption levels, and (2) purchase and consumption
of sparkling wine is influenced by occasion and venue. Importantly, there has been no prior
attempt to develop a conceptual model of buyer behaviour relating to sparkling wine.
METHODS AND MATERIALS
Focus groups were conducted to investigate consumers’ knowledge and preferences relating
to champagne and other sparkling wine, consistent with prior studies, such as that of Ritchie
et al. (2011) regarding the consumption of champagne and sparkling wine by young adults
within different hospitality settings, and other studies relating to perceptions of consumers of
wine, generally (e.g., Menezes et al. 2011). Tastings were included in the group activities to
enable discussion of individual preferences regarding champagne and other sparkling wine
varieties. This is consistent with the use by Charters (2005) of ‘focus tastings’ as an extended
form of focus groups, aimed at stimulating and enhancing participants’ discussion of their
ideas. Participants were recruited using a variety of methods, including social networking
sites and local distribution of a flyer. They were screened against inclusion criteria
comprising regular sparkling wine consumption (i.e., consumption on at least twelve
occasions per year) and being of legal drinking age (i.e., at least 18 years of age). Exclusion
criteria precluded participation by wine industry professionals. Participants were assigned to
one of four focus groups, based on age and gender: males under 35 years of age (n = 10),
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males aged 35 or more years of age (n = 10), females under 35 years of age (n = 19), and
females aged 35 or more years of age (n = 17). These criteria were employed due to evidence
of differences in wine-related attitudes and consumption based on age and gender (Bruwer,
Li, Bastian and Alant, 2005), with prior research suggesting 35 years to be an appropriate
age-related boundary (Hall, Binney and O’Mahony, 2004). All but two participants had
undertaken some post-secondary education, 29 having completed at least an undergraduate
degree. Reported family income ranged from below $25 000 p.a. (since several university
students participated in the study) to above $150 000 p.a., the mean falling within the $75
000–$100 000 range.
Two researchers attended each focus group, i.e., a moderator and an assistant. The moderator
led the focus group discussion, which included a series of prepared questions pertaining to
champagne and sparkling wine production, consumption, preferences, sensory attributes and
purchasing behaviour. Group discussions were transcribed by the assistant. The moderator
remained neutral and did not attempt to influence participants or bias responses in any way.
Consistent with in-depth qualitative research practice, transcriptions of participants’
responses were analysed using NVivo 10 software and thematic analysis (Braun and Clarke
2006).
FINDINGS
Participants identified several factors influencing their decisions to purchase champagne or
sparkling wine, the most common being discussed below. While initially discussed
separately, most factors tend to have interactions with one or more other factors. The most
important inter-relationships are discussed below and illustrated in Figure 1.
Personal taste was found to influence choice of sparkling wine rather than another type of
alcoholic beverage, and selection of a particular style of sparkling wine (such as champagne,
some other sparkling white, or sparkling red). Selected participant comments identifying this
issue, or illustrating some contrasts in personal taste, are provided below.
‘Everyone’s taste is different’ (Over-35 female [O35F] participant)
‘Wines are to personal taste’ (Under-35 male [U35M] participant)
‘I prefer French’, ‘I don’t care [whether French or Australian]’ and ‘I prefer
Australian sparkling red’ (Three O35F participants with contrasting views regarding
country of origin)
‘I like Moscato because it’s sweet’ and ‘[It’s] too sweet [for me]’ (Two under-35
female [U35F] participants with contrasting views about Moscato)
Country or region of origin, particularly with respect to the product being French, was found
to be an important factor across all four focus groups, although occasionally linked to the
product being champagne. It also was found that sparkling wine of French origin was
perceived in a very positive manner by many participants. Country of origin also influenced
another factor, ‘Brand image and reputation’. Selected participant comments relating to this
factor are provided below.
‘I think of French as more yeasty and nutty and earthy’ (O35F participant)
‘French is better quality’ (U35F participant)
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‘More secondary fermentation in French wine so more yeasty characteristics’
(U35M participant)
‘Traditional French Champagne is more special’ (U35M participant)
‘Region of origin does sometimes [influence choice] – comes under what you’re
expecting – you expect a certain quality… reputation is linked’ (U35M participant)
‘Region is more important [as an influence on purchase]’ (U35M participant)
Brand image and reputation were found to comprise an important factor influencing
purchase decisions across all four focus groups, sometimes linked to consumption occasion.
It also was found that this factor is influenced by another, ‘Country or region of origin’.
Selected participant comments relating to this factor are provided below.
‘Relationship with quality – the brand or label – perception of quality’ (O35F
participant)
‘I’ll give a bottle of Moet or Bollinger to someone who I think will be impressed
with the brand’ (Over-35 male [O35M] participant)
‘Brand is important – something you know or something recommended or you’ve
had before or seen advertised elsewhere’ (U35F participant)
‘Reputation makes a difference – expectations – when you make decisions, your
expectation gives you something to base decisions on, as to taste and quality –
number one factor’ (U35M participant)
Advice or recommendations, or expert reviews (from a family member, friend, restaurant
waiter/waitress or store salesperson; or from a wine expert or journalist) also were found to
comprise an important factor influencing purchase decisions. Selected participant comments
relating to this factor are provided below.
‘I’ve looked up reviews on the Internet, but not asked in the shop’ (U35F
participant)
‘Sometimes ask for advice – what recommendations are made’ (U35F participant)
‘Sometime in the restaurant asking the waiter/waitress is good’ (U35F participant)
‘Occasionally read wine reviews – they influence my decisions’ (U35M participant)
‘Reviews – Hallidays – use that as a general guide’ (U35M participant)
‘Recommendations are important to me’ (U35M participant)
Consumption occasion and company were found to comprise another important factor
influencing purchase decisions across all focus groups. Selected participant comments
relating to this factor are provided below.
‘It’s still a celebratory wine – would prefer a still [wine] as a general rule’ (O35F
participant)
‘French Champagne is for special occasions – Christening, wedding, birthday, rather
than a sparkling wine – it means Formula 1’ (O35M participant)
‘Depends on occasion – French Champagne for engagement party or present, or
wedding, whereas Australian sparkling for more casual drinking’ (U35F participant)
‘Brand [is determined by] occasion as well – if I’m going to boyfriend’s Mum’s
place, I’ll take Chandon or Jansz’ (U35F participant)
‘Occasion is important’ (U35M participant)
Price was found to influence brand and style of sparkling wine purchased in all four groups.
A relatively high price was found to constitute a barrier for some participants, while other
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participants were found to avoid sparkling wines below some particular price. In addition, the
factors, ‘Brand image and reputation’ and ‘Consumption occasion and company’, were found
to moderate the effect of price on the purchase decision. Selected participant comments
relating to this factor, and the moderation of its effects, are provided below.
‘If it’s on special – but not Yellowglen, it has to be at least $15’ and ‘I will not spend
over $10 – I’ll drink Yellowglen’ (Two U35F participants with contrasting views)
‘Expect to pay more for French’ (O35F participant)
‘For special occasion, maybe [pay] a bit more… depends on what you’re doing and
how many people are there.’ (O35F participant)
‘Price goes with occasion … if it’s just for a Friday night for drinks, then that’s a
different price than for a birthday or a wedding, birthday or new year’s eve or my
mother’s 80th’ (O35M participant)
‘Depends on occasion – what are you buying for, is it a big occasion, or is it low
key… normally $30-50 for an occasion. For a casual situation maybe
$20-35… less than special occasion. For gifts $40-50 – unless it’s really special
person – my Dad.’ (U35M participant)
DISCUSSION
The finding that the purchase of sparkling wine is influenced by personal taste is consistent
with sensory evidence that ‘taste sensitivity varies greatly among individuals’ (Lim et al.
2008, p. 493), and views that wine is ‘a sensory product’ with a ‘quasi-aesthetic character’,
that ‘can be judged by objective standards but is also a matter of personal taste’ (Charters
2009, p. 286). The finding suggests that a producer could benefit from marketing a range of
sparkling wines to cater to different tastes within the market. Findings that advice,
recommendations and expert reviews influence purchase behaviour, directly and via the
mediator, brand image and reputation, are consistent with the extant literature regarding the
influence of word-of mouth communication on brand image, trust and purchasing behaviour
in various product-market settings (e.g., Herr et al. 1991, Lin and Lu 2010). The findings also
are consistent with those of Friberg and Grönqvist (2012), who measured the effect of expert
reviews on wine sales in Sweden based on an analysis of five years of weekly data. Findings
that country or region of origin influence purchase behaviour, directly and via the mediator,
brand image and reputation, are consistent with those of Pettigrew and Charters (2010),
regarding consumption of alcoholic beverages in Hong Kong; and of Shukla (2011) and Yu et
al. (2013), regarding consumers’ purchases of luxury brands in India and the United
Kingdom. From a practitioner viewpoint, the findings confirm the importance of wine
marketers pursuing opportunities to obtain and promote favourable expert reviews for their
sparkling wines and to identify and promote regional distinctiveness. The finding confirming
that consumption occasion influences purchase behaviour suggests that marketers require
understanding of those preferences and the potential need to offer a variety of sparkling wines
for different occasions.
190 | P a g e
Figure 1: Model of factors influencing preference for sparkling
wine
LIMITATIONS AND FUTURE RESEARCH
Being exploratory, this study involved participants from just one city, each of just four focus
groups comprising a small, convenience-based sample. Therefore, generalisability of findings
is limited, and no attempt could be made to test the validity of identified relationships or to
quantify the strength of relationships. Further research is required to undertake those tasks.
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Charters, S. (2005), “Drinking Sparkling Wine: An Exploratory Investigation”, International
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Bacchus Goes Green: Fourth Interdisciplinary and International Wine Conference,
7-9 July, Reims Management School, France, ESC Dijon.
Charters, S. (2009), “Does a brand have to be consistent?”, Journal of Product & Brand
Management, Vol. 18 No. 4, pp. 284-291.
Charters, S. and Pettigrew, S. (2008), “Why Do People Drink Wine? A Consumer-Focused
Exploration”, Journal of Food Products Marketing, Vol. 14 No. 3, pp. 13-32.
Edwards, F. and Spawton, T. (1990), “Pricing in the Australian wine industry”, International
Journal of Wine Marketing, Vol. 2 No. 1, pp. 11-17.
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Fountain, J. and Fish, N. (2010), “‘It’s a happy drink’: Australasian Generation Y’s
experiences and perception of sparkling wine”, 5th International Academy of Wine Business
Research Conference, Auckland, NZ.
Friberg, R. and Grönqvist, E. (2012), “Do expert reviews affect the demand for wine?”,
American Economic Journal: Applied Economics, Vol. 4 No. 1, pp. 193-211.
Hall, J., Binney, W., and Barry O’Mahony, G. (2004), “Age related motivational
segmentation of wine consumption in a hospitality setting”, International Journal of Wine
Marketing, Vol. 16 No. 3, pp. 29-43.
Herr, P.M., Kardes, F.R. and Kim, J. (1991), “Effects of Word-of-Mouth and ProductAttribute Information on Persuasion: An Accessibility-Diagnosticity Perspective”, Journal of
Consumer Research, Vol. 17 No. 4, pp. 454-462.
Johnson, T.E. and Bastian, S.E.P. (2007), “A preliminary study of the relationship between
Australian wine consumers’ wine expertise and their wine purchasing and consumption
behaviour”, Australian Journal of Grape and Wine Research, Vol. 13 No. 3, pp. 186-197.
Judica, F. and Perkins, W.S. (1992), “A Means-End Approach to the Market for Sparkling
Wines”, International Journal of Wine Marketing, Vol. 4 No. 1, pp. 10-18.
Lee, H. and Sumner, D.A. (2013), “The Economic Value of Wine Names That Reference
Place in the US Market: Analysis of ‘Champagne’and Sparkling Wine”, in Pichery, M.-C.
and Giraud-Heraud, E. (Eds.), Wine Economics: Quantitative Studies and Empirical
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Lim, J., Urban, L. and Green, B.G. (2008), “Measures of Individual Differences in Taste and
Creaminess Perception”, Chemical Senses, Vol. 33 No. 6, pp. 493-501.
Lin, L.Y. and Lu, C.Y. (2010), “The influence of corporate image, relationship marketing,
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(2011), “Opinions and attitudes of wine consumers utilizing focus group”, Alimentos e
Nutrição Araraquara, Vol. 21 No. 4, pp. 503-508.
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comparison”, Journal of World Business, Vol. 46 No. 2, pp. 242-252.
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Danish Consumer Preferences for Wine and the Impact of Involvement
Polymeros Chrysochou
[email protected]
Jacob Brunbjerg Jørgensen
[email protected]
Abstract:
Purpose - In this paper we aim to explore consumer preferences for wine in the Danish
market (both off-premise and on-premise markets). Although several studies have measured
consumer preferences for wine, our study contributes to knowledge by investigating a
market that does not have big tradition in wine production and wine is imported. In
addition, our study explores the impact of involvement on wine preferences.
Design/methodology/approach - Based on a web-based survey, we applied the Best-Worst
Scaling (BWS) method to measure the importance of attributes that Danish consumers
assign when choosing wine. We further measured consumer level of purchase involvement
and we compared their preferences between high and low involvement groups.
Findings - Our results show that Danish wine consumers mainly rely on previous experience
with wine. Conversely, alcohol content and marketing actions (e.g. promotions) are not
factors that Danish wine consumers rely much on when choosing wine. Wine characteristics
are important, but are more prominent among the high involved consumers.
Keywords: Wine, preferences, involvement, Best-Worst Scaling, Denmark
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1. INTRODUCTION
Today there is so much diversity in wine styles that it is almost impossible not to find
the wine that suits all needs. Understanding what drives consumer preferences for wine, can
therefore contribute in better meeting consumer demands in a market that is characterized by
high competitiveness and a big number of brands.
Our study explores Danish consumer preferences for wine. Denmark is the country
with the third highest consumption of wine in Europe, only behind France and Italy
(International Organization of Vine and Wine, 2015). According to the same source,
consumption of wine in 2012 was 32.6 liters per capita. Denmark is not a wine producing
country and thus this statistic itself makes Denmark an interesting market to look at.
Until today there is not a known study that has explored Danish consumers’
preference for wine and therefore our study aims to give insight into this market. In addition,
it is of particular importance to understand what drives preferences in consumer markets
where wine is only imported and at the same time high in terms of consumption. Finally, our
study adopts preference measures used in earlier studies (Goodman, 2009), that allow us to
put our findings in an international context providing further understanding on the drives of
consumer preference for wine.
2.1 Consumer preferences for wine
Consumer preferences for wine has been the focus of several studies in the literature
(Casini, Corsi, & Goodman, 2009; Goodman, 2009; Goodman, Lockshin, & Cohen, 2007;
Jarvis, Rungie, & Lockshin, 2007). Goodman et al. (2007) and later on Goodman (2009)
conducted a cross country comparison of consumer preferences for wine that included
countries such as Australia, Israel, Germany, China, Brazil and the UK. Their study reveals
that preferences for wine are not universal and differences exist across countries. With
regards to the off-premise market, the authors showed that Australia, Germany, Israel and the
UK all assess previous experience with wine as the most important reason driving their
choice. For German, Italian and French consumers, matching the wine with food was also an
important driver. On the other hand, Chinese and Brazilian consumers rate brands as an
important product attribute. Additionally, the importance of someone recommending a wine
showed to be much more pronounced in Germany than the UK, China and Israel. With
regards to the on-premise market, the authors showed that in Australia, Germany and the UK
consumers’ previous experience with the wine was the most important attribute.
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2.1. The impact of involvement on wine preferences
Involvement is the motivational and goal-directed emotional state that determines the
personal relevance of a purchase decision to a buyer (Rothschild, 1984). This definition can
be translated into an interest, enthusiasm and excitement that consumers manifest towards a
product category (Goldsmith & Emmert, 1991), and therefore exerts considerable influence
on their decision making process (Laurent & Kapferer, 1985; Quester & Smart, 1996).
Several authors have seen involvement as consisting of several facets. For example, Laurent
and Kapferer (1985) distinguish involvement into five dimensions: product importance, risk
importance, risk probability, sign and pleasure. Lockshin, Spawton, and Macintosh (1997)
further distinguish between three different dimensions of involvement: product involvement,
brand involvement and purchase involvement. In our study we consider purchase
involvement which we relate to the level of concern for, or interest in, the purchase process
triggered by the need to consider a particular purchase (Beatty, Homer, & Kahle, 1988).
In relation to wine, consumers with high involvement are influenced more from
certain wine characteristics. However, these results are not always universal. For example,
Hollebeek, Jaeger, Brodie, and Balemi (2007) found that high involved consumers show
importance to region of origin, whereas price is more important for less involved consumers.
Quester and Smart (1996) found that involved consumers show more importance to region
and wine style, whereas the less involved consumers showed more importance to grape
variety.
3. METHODOLODY
3.1. Measuring consumer preference
We assessed consumer preferences for wine using the Best-Worst Scaling (BWS)
method (Marley & Louviere, 2005). BWS has several advantages compared to alternative
scaling methods, such as that it is unbiased by individual scale usage and that it allows for
comparisons across consumer segments (Cohen, 2009). During a BWS task, participants are
asked to indicate the most (best) and least (worst) important attribute from sub-sets of all
attributes (Marley & Louviere, 2005). In this study, we asked participants to choose the
attribute that most and the attribute that least influenced their choice of wine when buying in
wine. We assessed both off-premise (i.e. retail) and on-premise (i.e. restaurant, bar, café)
markets.
We adopted the list of attributes from Casini et al. (2009) and used in several other
studies (e.g. Chrysochou, Krystallis, Mocanu, & Lewis, 2012; Cohen, 2009; Goodman, 2009;
Goodman et al., 2007). This decision was made to ensure content validity and consistency,
but also to allow us to compare the study findings with results obtained in other countries.
We only made an adjustment in two of the attributes in the on-premise attribute list
(“varietal” was replaced with “grape variety” and “available in half bottle (375ml.)” with “a
description of how the wine tastes in the menu”). This decision was made to ensure that the
attribute list met the context of the market, and thus ensuring face validity. The final list of
attributes is shown in Tables 2 (off-premise) and 3 (on-premise).
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We combined the 13 attributes of each list into 13 sub-sets of 4 items each using a
Balanced Incomplete Block design. This type of design ensures that each attribute appears the
same number of times (i.e. four times) across all sub-sets and that within each sub-set each
pair of attributes appears only once. The aggregated BWS score was estimated by subtracting
the frequency of times that each attribute was chosen as least important from the frequency of
times that it was chosen as most important. Therefore, the aggregated BWS score varied from
-4 (i.e. four times chosen as least important) to 4 (i.e. four times chosen as most important).
3.2. Questionnaire and data collection
We organized the questionnaire into four sections. In the first section we included
questions referring to the participants’ wine consumption behavior. In particular, we asked
consumers about the frequency of consumption and the number of glasses of wine that they
drink on a typical week. In the second section, participants were introduced to the BWS task,
first for the off-premise and then for on-premise market. Those participants who never
consumed wine were screened out from this section of the survey. Next, participants were
asked questions in relation to involvement in wine. To measure involvement we used the
scale from Beatty et al. (1988), and more specifically the three items measuring purchase
involvement (e.g. I am very concerned about what brands of wine I purchase). Finally, the
last section of the questionnaire included questions regarding participants’ sociodemographic characteristics.
The questionnaire was translated in Danish. The online survey took place in June
2015 and was administered by a professional market research agency.
4. RESULTS
4.1. Sample characteristics
In total, 339 consumers participated in the survey. From those, 42 (12.4%) never
consumed wine and were screed out from the survey. Table 1 presents the demographic
characteristics of the sample kept in the analysis (N=297). The sample consists of more
females (53.2%), aged between 40-59 years (42.8%), who live in a household of two (46.4%)
and earn an average income (41.4%). We tested for differences with consumers who did not
consume wine, and we did not find any significant difference. In relation to consumption
frequency, 46.1% of the sample consumed wine at least once a week, and drank
approximately 3.9 glasses of wine on a typical week.
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Table 1: Demographic characteristics of the sample
N (=297)
%
Male
139
46.8
Female
158
53.2
18-39 years
61
20.5
40-59 years
127
42.8
60+ years
109
36.7
One
86
29.0
Two
138
46.4
More than two
73
24.6
Married
154
51.9
Single / Not-married
143
48.1
Low education
154
51.9
High education
143
48.1
Low income: 299,999 and below
101
34.0
Middle income: 300,000 – 599,999
123
41.4
High income: 600,000 and above
73
24.6
Gender
Age groups
Household
Marital Status
Education
Income (DKK)
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The involvement scale was internal consistent (α=.827). We then averaged the manifest items
of the scale (M=3.16; SD=1.35) and conducted a medium split. The low involved group
accounted for 50.4% of the sample (M=2.02; SD=0.67), whereas the high involved group for
49.5% of the sample (M=4.32; SD=0.74).
4.1 Consumer preferences
Table 2 presents results for the off-premise market. “Tasted the wine previously” is by far the
most important attribute. Characteristics of the wine (e.g. “Origin” and “Grape Variety”) and
“Information on the back label” follow next. The least important attributes are “Alcohol level
below 13%”, “Promotional display in-store”, “An attractive front label”. Looking at
differences between involvement groups, the high involvement group gives more importance
on “Grape variety” and “Brand name”, and less importance on “Information on the shelf”
and “Promotional display in-store”.
Table 2: Attribute importance (off-premise) an differences between involvement groups
Mean
BWS
SD
Low
Involved
High
Involved
t (p-value)
Tasted the wine previously
Origin of the wine
2.31
0.69
1.86
1.91
2.47
0.48
2.16
0.90
1.44 (.151)
-1.93 (.055)
Grape variety
0.49
2.09
0.10
0.89
-3.32 (.001)
Information on the back label
0.39
1.67
0.53
0.25
1.46 (.145)
Matching my food
0.27
2.23
0.25
0.30
-0.20 (.839)
Someone recommended it
0.26
1.56
0.20
0.31
-0.62 (.534)
Medal/award
0.08
2.09
0.01
0.16
-0.62 (.537)
Brand name
-0.15
1.55
-0.35
0.05
-2.20 (.028)
I read about it
-0.36
1.51
-0.34
-0.39
0.27 (.786)
Information on the shelf
-0.62
1.78
-0.07
-1.18
5.70 (.000)
An attractive front label
-1.16
1.76
-1.17
-1.15
-0.12 (.908)
Promotional display in-store
-1.32
1.90
-1.01
-1.63
2.87 (.004)
Alcohol level below 13%
-1.85
1.67
-1.99
-1.70
-1.51 (.132)
Attribute
Table 3 presents results for the on-premise market. “I have had the wine before and liked it”
is the most important attribute, followed by “Waiter recommended”. Characteristics of the
wine (e.g. “Grape variety” and “Origin of the wine”) are less important. Finally, the least
important attributes are “Alcohol level below 13%” and “Promotion card on the table”.
Looking at differences between involvement groups, the high involvement group gives more
importance on “Grape variety”, “Origin of the wine” and “Alcohol level below 13%”, and
less importance on “Waiter recommended”, “Suggested by another at the table” and
“Suggestion on the menu”.
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Table 3: Attribute importance (on-premise) an differences between involvement groups
Mean
BWS
SD
Low
Involved
High
Involved
t (p-value)
I have had the wine before
and liked it
Waiter recommended
1.57
1.79
1.55
1.59
-0.15 (.879)
1.22
2.06
1.48
0.96
2.20 (.029)
I matched it to my food
0.95
1.91
0.81
1.09
-1.24 (.216)
Suggested by another at the
table
Grape variety
0.51
2.07
0.79
0.22
2.41 (.016)
0.13
2.18
-0.23
0.49
-2.87 (.004)
Suggestion on the menu
0.11
1.43
0.30
-0.08
2.31 (.022)
Available by the glass
0.08
2.17
0.31
-0.15
1.85 (.065)
Try something different
-0.19
1.67
-0.25
-0.13
-0.64 (.523)
Origin of the wine
-0.33
1.99
-0.69
0.05
-3.26 (.001)
A description of how the wine
tastes in the menu
I had read about it, but never
tasted
Promotion card on the table
-0.45
1.70
-0.27
-0.63
1.87 (.063)
-0.56
1.49
-0.67
-0.45
-1.26 (.208)
-0.93
1.44
-0.95
-0.92
-0.17 (.866)
Alcohol level below 13%
-2.28
1.73
-2.49
-2.07
-2.13 (.034)
Attribute
4. DISCUSSION
Putting the results together, we can conclude that Danish wine consumers mainly rely
on previous experience with wine. Conversely, alcohol content and marketing actions are not
factors that Danish wine consumers rely much on when choosing wine. Wine characteristics
are also important, but are more prominent among those consumers with higher purchase
involvement with wine.
Compared to studies conducted in other countries, our results show that for the offpremise market Danish consumers have equal preferences to consumers in other markets. In
fact, “tasted the wine previously” is amongst the two most influential attributes in countries
such as Australia, Austria, Brazil, China, France, Germany, Israel, Italy, New Zealand,
Taiwan, UK and the United States (Goodman, 2009; Goodman et al., 2007), whereas the
alcohol content are the least important ones. For the on-premise market, Danish consumers
show also similar characteristics, showing more importance on previous experience with the
wine and less importance on alcohol content. One notable difference is that Danish
consumers are much more prone to seek suggestions from the waiter than the UK, Germany
and Australia (Goodman et al., 2007).
Our results have implications for the Danish market. First of all, Danish consumers do
not rely much on marketing actions (e.g. promotions). Therefore, retailers need to find
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different means of promoting their wines, such as providing more information about wine
style and characteristics. Such strategies would be more effective for consumers with higher
purchase involvement. The important role of prior experience requires retailers first not to
vary often their offerings, but at the same time offering the opportunity for consumers to taste
them. In fact, wine tasting events or promotions are not that common as they are in other
markets, especially wine producing ones that offer the opportunity to visit wineries, and thus
such strategies should be more widely adopted. In regards to the on-premise market Danish
consumers are more prone to seek advice about wine from either another person at the table
or from the waiter. This particular finding should provide incentive enough for managers to
optimize their waiters with all the right tools to give their customers the best possible
experience and advice on the wine they should drink.
5. REFERENCES
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Theory and implications,” Journal of Business Research, Vol 16 No. 2, pp. 149-167.
Casini, L., Corsi, A. M., and Goodman, S. (2009), “Consumer preferences of wine in Italy
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preferences for wine: An exploratory study of the US market applying the Best-Worst
Scaling,” British Food Journal, Vol. 114 No. 4, pp. 516-528.
Cohen, E. (2009), “Applying best-worst scaling to wine marketing,” International Journal of
Goldsmith, R. E., and Emmert, J. (1991), “Measuring product category involvement: a
multitrait-multimethod study,” Journal of Business Research, Vol. 23 No. 4, pp. 363371.
Goodman, S. (2009), “An international comparison of retail consumer wine choice,”
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Comparing international markets,”Wine Industry Journal, Vol. 22 No. 3, pp. 87-91.
Hollebeek, L. D., Jaeger, S. R., Brodie, R. J., and Balemi, A. (2007), “The influence of
involvement on purchase intention for new world wine,” Food Quality and
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purchasing involvement for retail segmentation,” Journal of Retailing and Consumer
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Quester, P. G., and Smart, J. (1996), “Product involvement in consumer wine purchases: Its
demographic determinants and influence on choice attributes,” International Journal
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Take Me There, I’ll Like the Product More
Nathalie Spielmann
[email protected]
Aikaterini Manthiou
[email protected]
Barry J. Babin
Louisiana Tech University, USA
[email protected]
Antonia Mantonakis
Brock University, Canada
[email protected]
Abstract:
Purpose: This paper examines the theory behind telepresence and its application to origin
of products. Rather than focusing on wine as a product, we examine the idea of place as
influencing product perceptions. For example, does seeing images of Champagne increase a
consumer’s attitudes toward the sparkling wine from the region? We examine the literature
of telepresence, tourism experiences, consumer involvement, and hedonic and utilitarian
attitudes toward products and then propose a conceptual model and propositions linking
these constructs together.
Design/methodology/approach: This is a conceptual, theoretical paper. The approach
consisted of examining past research from a variety of different domains, including:
marketing, wine, cognitive psychology, interactive environments, and tourism.
Findings: Our model suggests that the two dimensions of telepresence (vividness and
interactivity) each influence hedonic and utilitarian attitudes toward origin products. We also
suggest that consumer involvement with travel as well as the richness of data (if telepresence
is perceived via a dynamic or static online environment) influence attitudes.
Keywords: Telepresence, origin effects, oenotourism, attitudes
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1. INTRODUCTION
The theory of situated cognition shows that one cannot know something until they
experience it. Situated cognition theory makes a distinction between having learned about
something (knowledge) and having experienced something (knowing). Thus, learning comes
from doing, emphasizing action and plays a role in an experience taking place in time and
space. Place is a critical feature of all tourism offers and origin products. Before consumers
decide whether or not to travel to a novel place, they rely on external knowledge sources
(e.g., travel brochures, word-of-mouth, internet, etc.) as well as their personal internal search
resources (e.g., memories of actual experience with products related to place). Thus the
following questions arise:
1) To understand a tourism offer or origin (including terroir-based) products, must a
consumer be able to see the place from where it originates?
2) Does having a visual experience with a place moderate the hedonic and utilitarian
value perceptions of products originating from the place pictured?
3) What sort of visual imagery (static versus dynamic) is most effective in
communicating the experiences to be had in a place?
These are important marketing questions as globalization allows cultural goods to
flow between borders and numerous consumers experience products from and associated
with a specific place without even knowing where that place is on a map or what touristic
offerings it might possess. Although many consumers around the world have tasted
champagne, relatively few would be able to point to Reims on a map of France and many
would not associate the city as eponymous with Champagne. Furthermore, in today’s modern
age, consumers are more than ever likely to surf online for information regarding touristic
offerings and products, but regions and product companies cannot successfully promote their
offerings without considering an interactive strategy. In web environments where static and
dynamic visuals can be used, telepresence is an important consideration, likely to influence
how consumers experience products online.
2. TOURISM EXPERIENCES AND TRAVEL INVOLVEMENT
Tourism destinations are viewed as a means to stage authenticity that cannot be found
in tourists’ every daily life (MacCannell, 1989). The goal of all tourism destinations is to be
positioned in the mind of tourists as “experiences” (Richards, 2001; Oh, Fiore and Jeoung
2007). Several authors argue that the central challenge facing tourism destination managers
and planners is the design of effective tourism experiences (Ritchie and Hudson, 2009; Kim,
Ritchie, and McCormick, 2012). Tourists appreciate more the extraordinary and unique
experiences than the ordinary ones {Kim, 2010 #24}. Tourists primarily seek and consume
engaging experiences at destinations accompanied by goods and services unique to those
destinations. The components of the travel experience that strongly affect individuals, and
lead to memorability are the following: hedonism, refreshment, local culture, meaningfulness,
knowledge, involvement, and novelty (Kim, Ritchie, and McCormick, 2012). Therefore,
these engaging experiences generated by the physical and non-physical offerings of the
places involve tourists even more with travel. In particular, enduring travel involvement is
defined as the ongoing, ever- changing, unobservable state of motivation, arousal, or interest
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toward pleasure travel, evoked by particular stimuli (Rothschild, 1984). A number of tourism
studies examine tourists’ involvement with travel experience (e.g. Dimanche, Havitz, and
Howard, 1993; Gross and Brown, 2006; Ferns and Walls, 2012). Consumers’ involvement
levels are based on the strength of the relationship of pleasure associated with travel, to
individual needs, self-concept or values (Ferns and Walls, 2012). Therefore, travel
involvement can be described as the intensity with which travel ‘is embedded in and driven
by the consumers’ value system’ (O’Cass and Muller, 1999, p. 402). Moreover, tourists
involved with travel enjoy tasting and purchasing traditional and local products because these
goods appeal to their desire for authenticity (Sims, 2009) and add value to the overall tourism
experience by connecting them to the region and its perceived culture and heritage (Rand,
Heath, and Alberts, 2003; Skuras, Dimara, and Petrou, 2006).
3. TELEPRESENCE
Telepresence is defined as the degree to which an environment or communication
medium allows one the benefits of experiencing an environment without physically being in
that environment (Mollen and Wilson, 2010). This sentiment is made possible by a gathering
of technologies and techniques that reproduce a real environment such as photographs and
videos (Suh and Lee, 2005). The more a web site contains telepresence-inducing elements,
the more a consumer has the impression of subjective knowledge, and thus telepresence is
positively correlated with attitudes and intention to purchase (Hopkins et al., 2004). Likewise
a high level of experienced telepresence reduces sentiments of purchase risk (Suh and Lee,
2005). Keng and Lin (2006) show that online ads with high telepresence increase recall and
recognition of the ad.
The telepresence effect occurs due to heightened involvement, which manifests itself
in a hedonically rewarding state of flow (Csikszentmihalyi, 1975; Mollen and Wilson, 2010).
Related to involvement, it remains a distinct concept, often modeled as an antecedent to web
site engagement (Mollen and Wilson, 2010). Research suggests that flow amplifies
sentiments of telepresence, acting as “an intermediate variable between website properties
and consumer attitudes and behaviors” (Mollen and Wilson, 2010, p. 921). Thus telepresence
acts as an intermediary concept between web site functionalities/stimulus and consumer
outcome behaviors. The more a web site engages a consumer, the more sensory and cognitive
arousal they are likely to experience, augmenting the sentiment of “being there” (Mollen and
Wilson, 2010; Slater, 1999; Witmer and Singer, 1998). However, interactive content on
websites are likely to influence attitudes only if telepresence is felt by the website user (Fiore
and Jin, 2003). This is especially the case because telepresence, like flow, is a hedonic state
and leads to instrumental as well as experiential value (Holbrook and Hirschman, 1982). As
demonstrated by Björk (2010), tour operator websites that include emotional content, such as
images, result in affective states such as satisfaction, excitement, curiosity and pleasure, and
this even when consumers have yet to visit the destination. Thus, it is emotional content on a
brand’s website that most influences loyalty and purchase intent in the brand’s physical store
(Mummalaneni, 2005).
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4. HEDONIC AND UTILITARIAN EXPERIENTIAL VALUES
Due to the potential affective effects and experiential value resulting from
telepresence, an examination of the hedonic and utilitarian benefits of products related to the
place where the consumer is being transported is relevant to examine. When consumers make
purchases, they are not only looking to satisfy only functional needs, but may also seek to
indulge themselves (Babin et al., 1994). Not all products are alike, often differing based on
the hedonic and utilitarian benefits they represent (Voss et al., 2003). As per Chitturi et al.
(2008), the following definitions are used: “utilitarian benefits refer to the functional,
instrumental, and practical benefits of consumption offerings, and hedonic benefits refer to
their aesthetic, experiential, and enjoyment-related benefits” (p.49). Thus, perceptions of
products, in terms of the benefits they provide, can be classified as fun or functional.
Research specifies that joining function with aesthetics can be important in understanding the
full scope of consumer attitudes (Voss et al., 2003).
Ultimately, consumption choices made by consumers align with personal goals
specific to individual differences: functional features often relate to prevention goals (i.e.
“selecting a safe alternative”) and hedonic features often relate to promotion goals (i.e.
“being cool”) (Chernev, 2004). Recent research shows that hedonic benefits encourage
promotion emotions leading to increased delight, word of mouth, and repurchase intention. In
contrast, utilitarian benefits lead to prevention emotions resulting in increased satisfaction,
word of mouth, and repurchase intentions. When products meet both the hedonic and
functional requirements, consumers are shown to prefer products with more hedonic features
(Chitturi et al., 2008).
Past research in the domain of wine has suggested that the origin of a wine interacts
with telepresence perceptions, influencing both hedonic and utilitarian value expectations
(Babin et al., 2011). However this research examined the explicit or implicit statement of
telepresence. The explicit statement included a wine label with the following statement: “No
other wine transports the drinker to (the place) like this one.” As such, telepresence was
stated rather than experienced. Nonetheless, this research suggests that origin and products
emanating from an origin can interact with telepresence.
We propose that examining how perceptions of telepresence (i.e., being in a specific
place) impact the hedonic and utilitarian perceptions of a place, as well as the experience of
products from that place would be extending the current research on tourism, advertising, and
consumer behavior as it relates to the wine trade. For example, does seeing images of
Champagne (the place) add or take away from the hedonic and/or utilitarian value of
champagne (the product). We suggest that perceived telepresence not only influences
attitudes toward a place, but transference to products that are place-related.
Previous literature has outlined certain relationships that we would like to extend
theoretically, as demonstrated in Figure 1. First we focus on the nature of telepresence and its
dimensions, which have not often been tested individually. Telepresence consists of two
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dimensions, vividness and interactivity (Laurel, 1991; Steuer, 1992). Vividness includes
sensory breadth (number of sensory dimensions presented simultaneously) and sensory depth
(the resolution of each sensory dimension) (Steuer, 1992). In a website, rich media tools such
as videos, audio, and animation may be considered instruments that increase vividness by
enhancing the richness of the experience (Coyle and Thorsen, 2001). On the other hand,
interactivity as a functional tool is defined as “the degree to which a communication system
can allow one or more end users to communicate alternatively as senders or receivers with
one or many other users or communication devices, either in real time or on a store-andforward basis or to seek and gain access to information on an on-demand basis where the
content, timing and sequence of the communication is under control of the end user, as
opposed to a broadcast basis” (Fortin and Dholakia, 2005, p. 388). Increased vividness and
interactivity increase perceived telepresence (Coyle and Thorsen, 2001; Klein, 2003; Hopkins
et al., 2004). Overall perceived telepresence has a direct effect on attitudes to the ad (Hopkins
et al., 2004). Yet past research suggests that increased levels of vividness result in higher
attitudes toward web sites (Coyle and Thorsen, 2001). Past research on telepresence outlines
the direct impact of perceived telepresence on brand attitudes, and ad attitudes (Park and
Young, 1986), but does not make the distinction between the types of attitudes, hedonic or
utilitarian (Voss et al., 2003). This is surprising as Mollen and Wilson (2010) include
instrumental and experiential value as prefacing consumer outcomes. As such, we propose
that vividness, because of its sensorially rich content that appeals to multiple senses, creates
experiential value and emotions whereas interactivity, as a functional tool, allows the
consumer to have a better idea of how the product is made and how that relates to the place.
Thus, we expect the following:
P1: Increased vividness has a positive impact on hedonic attitudes toward the placerelated product.
P2: Increased interactivity has a positive impact on utilitarian attitudes toward the
place-related product.
Media characteristics influence consumer responses such that perceived telepresence in
dynamic media environments should result in more positive responses from consumers than
perceived telepresence in static media environments (Klein, 2003). Attitudes formed in
virtual environments are stronger than in static environments (Klein, 2003) because they are
closer to being a direct experience (Fazio and Zanna, 1982; Smith and Swinyard, 1988). As
such, we propose:
P3: Richness of the media environment moderates effects on the a) hedonic attitudes
toward the product and b) the utilitarian attitudes toward the product
P4: Perceived telepresence from a dynamic media environment results in higher
hedonic attitudes toward the product than from static environments
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Consumer involvement moderates the response between perceived telepresence and attitudes
(Li et al., 2001), in particular for online environments (Novak et al., 2000). Media richness,
the result of more and more various peripheral cues, impacts the processing of advertising
online (Cook and Coupey, 1998). For example, Hopkins et al., (2004) operationalized a very
rich media environment as having music, motion, animation, etc. Research has shown that
tourists involved with travel use online settings to buy their trips because information quality,
system quality, and service quality are present in the online setting. (Wen 2010). Moreover,
highly involved tourists appreciate tasting and purchasing regional products because these
goods link visitors with the region and its heritage (Rand, Heath, and Alberts, 2003; Skuras,
Dimara, and Petrou, 2006). Thus, we suggest that involvement with travel will moderate the
influence of perceived telepresence on the attitudes toward the product from the place.
P5: Consumers who are more involved with travel will perceive more a) higher hedonic
value expectations (manifesting themselves in hedonic attitudes) and b) higher
utilitarian value expectations (manifesting themselves in higher utilitarian
attitudes) toward the consumption experiences involving the product from the
place than consumers who are less involved with travel.
Figure 1: Conceptual Model of the Influence of Telepresence
Richness of media
(static vs. dynamic)
Vividness
P1 +
P3a +
P3b +
P4 +
Hedonic attitudes
toward the product
related to the place
Interactivity
Involvement with
travel
Utilitarian attitudes
toward the product
related to the place
P2 +
P5a +
P5b +
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Emotional impact of wine selling websites: An investigation of the online
perception of wine web stores
Peter Merdian
University of Applied Sciences Ludwigshafen, Germany
[email protected]
Edith Rüger-Muck
[email protected]
Gerhard Raab
[email protected]
Abstract:
Purpose - The combination of online wine marketing and web design based on emotions is
an important but neglected field of research. In order to get a better understanding of the
potential of emotional web design, this preliminary study evaluates to what extent the
emotional perception differs between online wine stores.
Design/methodology/approach - In this preliminary study, wine consumers of different
German universities evaluated the websites of twelve wineries by rating 48 screenshots
using the self-assessment manikin scale (SAM). This study included two analyses of
variances (ANOVA) to indicate significant emotional differences between twelve domains
and different website sections.
Findings - Websites differ significantly on the rating of felt “dominance” by consumers.
This means that users experienced different levels of “being dominant” whilst judging the
wineries´ websites. A second application of ANOVA indicates significant differences on felt
valence and arousal between the website sections “landing page”, “product list”, and
“product detail”. Interestingly, the non-commercial areas of websites were given higher
emotional ratings than the web shops itself.
Practical implications - Websites with large images and happy-looking people as well as
colourful and simple web design seem to create a stronger feeling of dominance. However, a
pure reduction of the internet store on technical aspects and booking efficiency is not
recommended.
Keywords: Wine, emotions, e-commerce, web design, self-assessment manikin
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1. INTRODUCTION
In recent years, the internet became an omnipresent medium that impacts the way we
communicate, gather information and purchase goods. In 2014, the worldwide B2C
e-commerce sales rose to about USD 1.316 billion and are expected to increase to USD 2.489
billion by 2018 (eMarketer, 2014). Today, more than 72% of all Germans buy products and
services online (IfD Allensbach, 2014). This development of e-commerce applies to a wide
range of products, including the distribution of wine. According to the latest market
evaluations, almost 32% of all Germans are interested in buying wine online (LZ, 2014). 29%
even prefer the online channel over other distribution channels (BMWI, 2015). For this
reason, the online sales potential in the wine industry is substantial. Despite this positive
development, there is a lack of scientific research in the field of e-commerce as well as in the
wine industry itself, especially concerning website elements which evoke emotions of
consumers.
The shopping experience during a visit of a web shop can be crucial, because the
attractiveness of websites is linked with commercial success (Gahne and Shokrizade, 2014).
Therefore, we expect emotional reactions by users when they are surfing on well-designed
websites (Wilhelm, 2012). Accordingly, this study tests the emotional impact of wine web
shops on users, investigates where significant systematic or merely arbitrary differences are,
and tries to gain a deeper knowledge of emotional web design in general. Based on the
findings of this preliminary study, the main study will analyse the relationship between
emotions and the willingness to pay, focus on sales possibilities and other website usage
indicators, which are beneficial for the economic success of an online store.
1.1. Research on Emotions
Since the early 1980s, emotions have often been the subject of empirical studies (Vogel,
2013), including research on the effects in the decision making process (Hill and Gardner,
1987; Loken 2006; Cohen et al., 2008). Emotions affect, among other things, the willingness
to take risks (Arkes et al., 1988), impulsive buying behaviour (Weinberg and Gottwald, 1982)
and the willingness to pay (Lerner et al., 2004). At that time, emotionality was often a
neglected field in marketing with the prejudice, that consumers` buying decisions are based
on a pure rational information process (Holbrook and O'Shaughnessy, 1984). Yet, for
products that are based upon fulfilling more emotional needs, the traditional view seems to be
inappropriate. According to Zaltman (2003), consumers in general do not totally think
deliberated, because up to 95 percent of human thinking happens unconsciously. This
supports the theory that decisions are not only based on utilitarian motives, but can also be
dominated by emotional desires, especially for some types of products and services (Singh,
1999).
Research on emotions is challenging because humans react to stimuli differently and struggle
to describe and differentiate their subjective emotions that they have experienced. The
research on emotion itself offers a large number of diverse and contradictory conceptions of
emotions (Kleinginna and Kleinginna, 1981; Damasio, 2008; Rossiter, 2001). For this study,
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we refer to the definition by Plutchik (1984): “an emotion is an inferred complex sequence of
reactions to a stimulus, and includes cognitive evaluations, subjective changes, autonomic
and neural arousal, impulses to action, and behaviour designed to have an effect upon the
stimulus that initiated the complex sequence.”
1.2. Self-assessment-manikin
According to the investigations of Russell (1980) and
Lang, Bradley and Cuthbert (1990), emotions can be
summarised in three basic dimensions described as a
feeling of arousal, valence (pleasure), and dominance.
In order to measure the subjective emotional effect of
a website, we use the self-assessment manikin (SAM)
scale by Bradley and Lang (1994) in the following
study. In general, self-reports are common in research
on emotions and serve as a primary method for
ascertaining emotion and mood. The SAM scale
is used as a well-approved method for measuring
Figure 1: The Self-Assessment Manikin (SAM)
emotional responses (Morris, 1995). Although the
used to rate the affective dimensions of valence,
scale is not new, it is applied in numerous recent
arousal, and dominance (Bradley and Lang 1994).
studies like Lueken et al. (2014), Suess and Rahman
(2015), and Bublatzky et al. (2014). To overcome the textual difficulties in semantic
differentials (Mehrabian and Russell, 1974), Bradley and Lang (1994) designed a pictureoriented instrument to assess the three dimensions valence, arousal, and dominance directly
by a set of graphical and nonverbal manikins (see figure 1). The first row shows the icons for
the evaluation of the dimension valence using a set of five smiley faces from “sad” to
“happy”. The icons for the evaluation of the dimension arousal are represented in the second
row starting with a “calm” manikin and continuous decreasing pictures which end as an
“explosion” shape at the highest level of arousal. The third row for the dimension dominance
contains five manikins with various characters´ sizes, beginning with a very small to an “outof-the-border” manikin.
2. METHODS
For this study, we apply the SAM scale in the context of wine and e-commerce. As a first
hypothesis, we assume that the rated emotionality of the selected domains differs significantly
on valence (H1.1) arousal (H1.2), and on dominance (H1.3). As a second hypothesis, we assume
that four selected website sections differ significantly regarding valence (H2.1), arousal (H2.2),
and dominance (H2.3). In our approach, the hypotheses will be tested through the use of two
analyses of variances (ANOVA).
Students and faculty staff from various courses of study at four universities in Germany took
part in a ca. 45 min. computer assisted study between April and June 2015. As a criterion for
exclusion, participants had to be wine consumers. Overall, twelve domains of German
wineries were tested. An entire website was represented by four screenshots. The screenshots
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were assigned to specific website sections: “landing page”, “who we are”, “product list”, and
“product detail” (see figure 2). The first two sections represent the non-shop-area. They
practically give a first overview about the winery, the owner, and the range of products. The
other two website sections belong to the shop-area, where products can be purchased. All
screenshots were rated successively on the three self-assessment manikin scales valence,
arousal, and dominance.
Figure 2: The four sections of screenshots and their sequence during the experiment.
3. RESULTS
Data was obtained from 147 participants of the survey. 14 participants declared that they
“never drink wine” and were therefore excluded. Thus, the remaining sample consisted of
133 cases which took part in the experiment. 67 participants were male and 66 were female.
Their age ranged from 18 to 66 years (M = 29.78, SD = 10.20).
Firstly, we conducted a one-way ANOVA to analyse significant differences between the
emotional impacts on the selected websites. A one-way ANOVA between
the domains (independent variable) and their ratings of valence, arousal, and dominance
(dependent variable) at the p < .05 level was performed. There was no significant effect
between the websites on valence, F(11,36) = 1,120, p =.375, and arousal, F(11,36) =1,877,
p = .077. Yet, the analysis revealed a significant difference of the websites’ dominance
F(11,36) = 2.475 , p = .020. Post hoc comparisons using the Tukey HSD test indicated that
the mean score for domain number four (M = 3.14, SD = .22) was significantly different from
the first domain (M = 2.77, SD = .14) and between domain number three (M= 2.78,
SD = .09). Accordingly, hypotheses H1.1, H1.2 were rejected and H1.3 was confirmed.
A second one-way ANOVA analysed differences between the four website sections
(“landing page” etc.) of each domain and their ratings on valence, arousal, and dominance at
the p < .05 level. The website section had no significant effect on the variance of SAM´s
dominance level F(3,44) = 1,237, p = .308. But there was a significant effect for valence
F(3,44) = 4.971, p = .005 and for arousal F(3,44) = 3.634, p = .020. Post hoc comparisons
using the Tukey HSD test showed that the dimension valence of the “landing page”
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(M = 3.56, SD =.34) was significantly different from “product list” (M = 3.04, SD = .38) and
“product detail” (M = 3.05, SD =.29). The post hoc analysis also revealed that the section
“landing page” (M= 2.77, SD =.36) had a greater arousal impact than the section “product
detail” (M = 2.39, SD =.22). Therefore, hypotheses H2.1 and H2.3 could be confirmed, whereas
H2.3 was rejected.
4. DISCUSSION
A comparison among the twelve different websites (domains) of the wineries shows a
difference on the SAM dimension dominance. This is the case for the website of the first,
third and fourth winery. The highly ranked fourth website had a clear, powerful design with
striking colourful elements. A large proportion of the visible screenshot area is covered with
images showing celebrating people with food and only small text elements. Products in the
shop are presented extensively, without frills and with high quality. In contrast, the lowest
rated winemaker website in this dimension is prosaic and pale coloured. The images tended
to be very small and are spread randomly on the display, showing employees who look
seriously in front of a dark and empty room. The third domain is also poorly rated regarding
to the SAM criterion dominance. Here, the observers of the website see dark colours, small
pictures and plenty of text. The main navigation bar is overloaded and divided the visible
range horizontally in the middle. While the web design of the “landing page” is rated
“average”, the web shop looks outdated. The observers read a lot of text and see tiny,
unpretentious product images and a tabular list of wines with many screen splitting frames.
These statements are confirmed by the average ratio between text and picture elements on the
screenshot. The fourth website (with high ratings on “felt dominance”) has only 14.4%
written content, 35.6% image elements and 50% other website elements on average, whereas
website one (18.8% text, 35.6% images, 45.6% other) and website three (25.9% text, 15.9%
images, 58.2% other) have more areas covered with words and in part less with photos –
which could be an indicator for emotional web design too. The comparison of the high versus
the low rated websites shows which elements of web design can cause feelings of
domination, so users experience a feeling of personal strength or superiority.
However, it seems that online shops are less capable of having the same emotional impact than
non-shop-areas. Only three of twelve websites did not decline in emotionality between the
“landing page” and the online store of the observed screenshots. Contrary, to the noncommercial web areas, the online store has a more technical understanding of the purchase
process because its main purpose is basically selling products. It makes sense to build the
display area as organised as possible, in terms of navigation, filtering, comparing and product
listing. Those familiar “must-have-features” ensure simplified handling, efficient navigation
and a better shopping experience, but simultaneously limit the emotional design of a web shop.
The analysis among the four screenshot sections on our examined domains indicates that the
SAM dimensions arousal and valence scored higher in the category “landing page” than in
the categories “product list” and “product detail”. In general, shop area screenshots use less
space for pictures and focus more on text boxes and listings in tabular form to create
a lower feeling of joy and excitement. However, in some cases the web design is inconsistent
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between the general website and its shop, so users might have assumed to look at websites
from different winemakers. Overall, “landing page” screenshots have larger images, more
striking headlines, less text elements and minor empty space. Some wineries try to sell their
wines by telling their personal story. Personal facts could add emotional value and generate
user attraction. Users are therefore able to identify themselves better with the winemakers as
they were able to sympathise with the people around the winery and to share similar values.
4.1. Practical implications
This evaluation emphasizes that web stores with a purely functional focus and without an
emotional perspective, can misguide. Especially for emotional products like wine, sterile web
pages can lower the positive customer’s perception. According to our psychological evaluation,
online stores should not only be reduced on technical aspects, but should also be carefully
designed to create an exciting or pleasant atmosphere. Large, high quality images showing
happy people or inspiring moments like a panoramic view of the vineyard have the potential to
create an emotional impact on consumers. Colourless or text-heavy web design causes the
opposite effect. The structure should be clear and easy to pick up, without using prosaic tables.
The entire website should have a homogeneous and consistent appearance – from the landing
page until the end of the shopping experience. These results go along with the conclusion of
Childers et. al. (2001), who claimed that images, colours, animations, sound, music, humour,
games, etc. contribute to a better shopping experience and help to create a more pleasant
ambience. Winemakers´ online stores should not only win the customer´s mind, but also their
hearts.
4.2. Limitations and need for further research
The limitations to our research are the basis for subsequent studies to enhance our knowledge
regarding online retailing success factors and interactive online shopping experience. Instead
of rating static screenshots, the participants could rate the website after “real browsing”. This
would be more complex, but offers a more authentic valuation basis - because some “look
and feel” elements of an interactive medium may also have an emotional impact. Another
limitation is the non-representative sample and the domain selection that we used for our
study. We selected only twelve websites of wineries from a particular niche product (wine),
in a single country (Germany), and for a single primary intended benefit (shopping). In
addition, this experiment involved a disproportionate number of young students, who were
wine consumers as well. The outcomes of our study can therefore not be seen as fully
representative and needs to be confirmed with a larger amount of participants of all age
groups and with a broader selection of websites. In further studies, the relationship between
“emotional shopping” and its financial impact for shop owners and winemakers should be
further examined. Therefore, we need stronger evidence how web design characteristics
affect purchase behaviour and other usage indicators. In addition, it would be interesting to
gather more information on users about their rational evaluation of the websites, their
purchase interests, demographics and psychographics in order to get a better picture among
different preferences of consumer groups. Finally, the methodology of the SAM scale as a
self-reporting tool is associated with limitations such as a time delay between the felt emotion
and consumers´ reported emotions. This can lead to a softer degree of the indicated emotion.
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To determine these complex emotions in several situations further research could perform
repeated measurements which can analyse stimuli to various moments. Moreover, the
application of implicit measurements such as electromyography or facial scanning software
would help to get deeper insights of consumers’ emotional reactions regarding web design.
5.
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How to Engage Wine Customers Online and Offline?
An Exploratory Study
Regine Heimers
University of Applied Sciences Ludwigshafen on the Rhine, Germany
[email protected]
Edith Rueger-Muck
University of Applied Sciences Ludwigshafen on the Rhine, Germany
[email protected]
Abstract:
Purpose: Due to the rising popularity of customer engagement (CE), this exploratory study
aimed to provide a first understanding of potential marketing tools for CE online and offline.
Design/methodology/approach: The research constituted a pre-study to propose an
experimental approach in order to assess how these tools impact CE. To achieve the research
goal, we applied a mixed-methods approach combining qualitative and quantitative market
research methods. We interviewed seven marketing experts in order to identify effective CE
tools. In addition, we drew upon a self-administered online survey, to which 345 German
wine consumers responded, in order to investigate their preferences regarding CE tools used
by wineries.
Findings: Qualitative and quantitative results revealed that from an marketing expert’s as
well as from a customer’s point of view, offline CE tools were regarded to dominate online
tools. Experts further claimed the presence of an experience, the interactive and personal
components as well as the awareness of the target group to be fundamental for effective CE
tools.
Practical implications: Regarding the German wine market, practitioners are recommended
to rather focus on offline tools when attempting to engage customers. In addition, they are
demanded to put higher efforts in mobile platforms. When dealing with CE tools in detail,
the advised aspects of experts should be taken into account.
Keywords: Customer engagement, engagement tools, relationship marketing
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1. INTRODUCTION
This pre-study builds on the challenge of a rising interactive nature of customer relationships
faced by wineries. Given the increasing use of the Internet by wine consumers, they do not
only have a vast amount of readily available information as well as a wider choice of
products and services. They also have direct channels to interact with companies and their
peers (Deighton and Kornfeld, 2009). Customers have become connected (MSI 2006) and
have taken an active role in the dialogue with companies across industries (Sawhney et al.,
2005). These changes have resulted in a new field of research in the last decade: Customer
Engagement (CE). Vivek et al. (2012) define CE as “an individual’s intensity of participation
in and connection with an organisation’s offerings or organisational activities”. While having
shed light on its conceptualisation (e.g., Bowden, 2009; Brodie et al., 2011a, b), empirical
efforts have been neglected in marketing research (Hollebeek et al., 2014). This gap was
highlighted by the Marketing Science Institute (MSI) in 2014 by setting one research priority
on the question: “how do social media and other marketing activities create engagement?”.
We aim to approach this by identifying potential marketing tools to engage with the
customer, which is the central research objective. The pre-study constitutes a preliminary step
to further analyse how these tools impact CE.
Increased efforts in CE might be an opportunity for wineries in the digital era, which
challenges the wine industry in particular. Not only empowered customers constitute a
competitive challenge. But also the increasing virtualisation of products and services
contrasts the fact that wine is classified as an experience good (Storchmann, 2012). In
addition, the relative complexity of the product, compared to other consumption goods,
causes barriers for customer management, especially online (Cohen et al., 2012). Hence,
efforts in service quality and the reputation of a winery become most important (Bresolles
and Durrieu, 2010). Enforcing CE which is claimed to impact marketing constructs such as
satisfaction, loyalty (Bowden, 2009) or the effectiveness of advertising (Wang, 2006) might
be one approach. While CE has been strongly related to online environments thus far, we
claim that efforts in research and practice have to be extended to offline environments (see
also Brodie et al., 2011b).
We begin with a literature review on CE, by presenting its theoretical embedment,
conceptualisation and status quo of empirical research regarding its tools. Following this, we
provide first results of marketing expert’s and customer’s perspective on potential tools of CE
online and offline. We conclude with a brief discussion of the results, its limitations and we
infer future research areas.
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Originating from organisational behaviour research, especially in the context of work and
role engagement (Kahn, 1990; Saks, 2006), the concept ‘engagement’ has not yet been fully
approached in marketing research. However, in marketing theory the construct CE can be
attributed to relationship marketing research by adding experience and interactive aspects to
the relationship with existing and potential customers (Prahalad and Ramaswamy, 2004;
Vivek et al., 2012). Linked to this, marketing academics emphasise that interaction is not
restricted to the relationship between customers and companies. It might be any combination
such as customer’s engagement in offerings, activities and the actual exchange amongst
customers (Hollebeek et al., 2014; van Doorn et al., 2010). Over the last decade marketing
research has contributed in particular to the conceptualisation of CE (antecedents,
dimensions, consequences, measures etc.). However a review of related marketing literature
shows that a common understanding of the construct has not yet been reached.
While having initially referred to behaviours, both positive or negative, that exceed purchase
(Bowden, 2009; Kumar et al., 2010; van Doorn et al., 2010; Verhoef et al., 2010), several
researchers have extended the scope to cognitive, emotional and social dynamics (Brodie et
al., 2011b; Hollebeek, 2011; Vivek et al., 2012). Moreover, engagement is regarded as a
motivational state that is either temporary or ongoing with changing engagement levels over
time (van Doorn et al., 2010). This raises the question how this state can be achieved by
wineries and therefore builds the starting point for the underlying research.
Efforts in analysing marketing tools engaging the customer are still underrepresented in CE
discipline. Vivek et al. (2012) for instance, assessed in a qualitative study “activities” and
“offerings” to be the main tools that can be customer- or company-initiated. What both tools
have in common is assigning the customer an active role, allowing him or her to participate in
the experience or interaction. “Activities” go beyond offerings when referring to skill and
new product development as well as to creative events with the possibility to socialise or
even with an innovative character. These can also include Branded Marketing Events
(BMEs), of which the impact on CE was examined by Altschwager et al. (2014) in the
context of wine business.
To further explore the marketing tools triggering CE while referring to the wine business, we
set the focus on online versus offline environments for the following elaborations.
3. CURRENT RESEARCH
3.1. Study 1 – The Marketing Expert Perspective
We conducted two independent studies, we present below our qualitative findings.
3.1.1. Design, Method and Procedure
To gain a comprehensive understanding of CE tools, we conducted semi-structured, in-depth
interviews in the last quarter of 2014. The selection qualification criteria were expertise
marketing with a focus on wine marketing or on CE, or both. We reached out to 11 marketing
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experts via email or phone, seven of whom agreed to an interview. The interviewees, each
holding a leading position in its field, were categorised on their focus areas of wine marketing
(3 consultants, 1 event marketer and author); marketing research with foci on interactive
technologies (1 manager customer care) and on wine (1 researcher in consumer behaviour);
as well as B2B marketing in online and offline services dealing with customer engagement
tools (1 director product marketing). They range in age between 32 to 51 years and in work
experience in marketing between four to 24 years.
The average interview lasted 45 minutes, and was conducted by Skype or face-to-face, which
were then digitally transcribed and transferred to MAXQDA. Methods of content analysis
included coding and keyword search in order to establish certain categories and subcategories
by following the standards of grounded theory (Corbin and Strauss, 2015).
Given the exploratory nature of the study and the semi-structure, we engaged around five
broad areas of interest to the interviewees instead of posing a series of specific questions. We
did let emerge the central theme of the paper in interviewing respondents about topics such as
the status quo of customer management (1), the impact of new media on customer
management (2) and their personal definition of customer engagement (3). For the purposes
of the research objective, we focus on the following two areas: potential tools to engage with
the customer (4), from an online as well as from an offline perspective (5).
3.1.2. Results
From the content analysis it can be implied that certain frame conditions have to be
considered when dealing with CE. Calder et al. (2009) assert that experience is the basis for
engagement. Supported by statements from six out of seven experts, this view rather
underlines a hedonic nature. To the contrary, utilitarian characteristics are rather regarded as
prerequisite. Moreover, across almost all interviews the importance of the interactive
character of CE-tools was highlighted.
Enforced activities should allow customers to interact amongst each other with the
superordinate goal of a networking brand community, where they engage in evaluation,
optimisation and development of winery’s products, services and campaigns. Besides the
actual experience, three experts claimed the importance of a personal dimension. People
behind the brand must step forward to interact with customers, in particular the winery’s
owner him- or herself. Four of the experts further agreed on the aspect that target groups
merit attention. Thereby, two experts stated the relationship intensity to be decisive for this
type of tools.
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Figure 1: tools of customer engagement, online and offline.
The seven marketing experts placed their focus mainly on offline tools in the context of wine
(Figure 1). This is different from the ‘brand communities’ that are predominantly in online
environments so far (Brodie et al., 2011b; Sawhney et al., 2005; Wirtz et al., 2013).
Furthermore, co-creation constituted a relevant tool, but again in the offline context. One
wine marketing expert stated that the concept co-creation in wine marketing would not be in
forms of co-production of the product itself, but rather in terms of collecting feedback in
general or in the creation of wine labels.
Offline “events” still seemed to be one of the most important tools for wine marketing CE.
These are not restricted to wineries and they can include fairs or wine feasts in central areas
with regional customers. “Newsletters” were also acknowledged as an inherent CE tool that
can be online or print, depending on the target group. Print medium was considered state of
the art when working with the premium and ultra-premium sector, whereas electronic
newsletters should rather be applied for general updates throughout the year. Referring to
content, keywords such as “the importance of visualisation and authenticity” occurred
repeatedly.
The former was also of particular relevance when mentioning online tools such as “video
marketing”. Online, proactive activities like “follow-up actions”, including informing the
customer when their favourite wine is available again, or recommending other wines, were
stated.
Efforts in “mobile tools” were regarded by the majority of experts as highly important
because traffic nowadays comes mainly from mobile devices. But five wine marketing
experts regarded the potential of mobile tools for the wine business as critical, because a high
proportion of wineries are still not providing a functioning mobile website. Nevertheless, QRCodes placed on wine bottles, enabling the customer to evaluate the product, to register
online, to gain incentives or information where to buy the wine, were regarded as useful by
five experts. Controversially, when it comes to ‘apps’ as CE-tool, two experts considered
them as an important interface while two others had an opposite view.
3.2. Study 2 – The Customer Perspective
To look at CE from a customer’s point of view, our second study investigates, in a
quantitative manner via an online survey, potential tools for CE.
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3.2.1. Design, Method and Procedure
A total of 345 German wine consumers participated in a self-administered, online survey that
was distributed via e-mail lists of three universities in South Germany. We targeted all fields
of study in the first quarter of 2014 to investigate the consumer’s likelihood to engage in CEtools, comprising certain activities and offerings, in wineries. In order to identify these tools,
nearly 200 winery’s websites and Facebook pages were investigated based on a random
selection of German wineries from the wineries’ list of the German Wine Institute website.
They were then analysed for tools with an interactive and innovative character. 43 marketing
tools were derived, from which three researchers selected the top ten tools according to the
degree of interaction and innovation. In addition, more general questions were posed
regarding sociodemographic characteristics; their wine and social media behaviour.
3.2.2. Results
The survey respondents were equally split at 50% female, and 50% male, the mean age was
between 20-29 years. Almost 40% of respondents consumed wine more than once per week
and they bought their wine mostly in wineries or supermarkets. Measured through subjective
wine knowledge (Flynn and Goldsmith, 1999) and wine involvement (Lockshin et al., 1997)
by using two and three items (five-point scale), 37% of the respondents rated their affinity
with wine as high. In contrast, 46% of participants showed low involvement in social media,
again assessed via three items measured on a five-point scale (Lockshin et al., 1997).
The initial set of CE-tools constituted ten items. In order to reduce data, we conducted an
exploratory factor analysis resulting in a two-factor solution. KMO and Bartlett’s test proved
the sample to be adequate for factor analysis (KMO=0.840, p=0.000). Factor one indicated
online characteristics. It had six items comprising of “sharing information about the product
and service” (0.79), “exchanging favourite recipes with customers” (0.77), “a video diary of
the winery” (0.71) as well as “an online wine tasting” (0.58). We assumed the items “wine
education app” (0.47) and “mobile website” (0.70) to be part of a third factor, but found that
they can also be loaded on factor one. This might be due to the fact that these tools are
stronger related to the online environment. Furthermore factor two contained four items,
namely “creation of a vintage with the wine producer” (0.82), “developing mixed drinks
based on wine” (0.73), “personalisation of wine labels” (0.66) and “wine evaluation” (0.58).
We attribute offline characteristics to factor two. Reliability of the two factors was supported
by Cronbach’s alpha accounting 0.80 for factor one, 0.72 for factor two.
Based on the two-factor solution we first compared the likelihood of consumers to engage
online and offline. We found that wine consumers are more likely to engage in offline
compared to online activities. This tendency to favour offline engagement tools is illustrated
in Figure 2. While almost 50% were likely to engage in offline activities, only 17% of wine
consumers would potentially engage in online tools.
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Figure 2: comparison of the likelihood to engage in online and offline tools, n=345
This tendency is further reinforced when we look at the activities in detail (Figure 3). Out of
ten activities, the top five CE tools were selected for comparison, amongst we only found one
online variable, the “app”. It has to be added, that an “app” can be only characterised as an
online tool by its origin and dependence, but functions can also be accessed offline. In
contrast all four offline tools were favoured by respondents. The highest-ranked activity was
“to evaluate new vintages”, of which 57% would be likely to engage in.
Figure 3: top five tools of customer engagement.
4. DISCUSSION, LIMITATIONS AND IMPLICATIONS
CE has gained great relevance, both in research and in marketing practice. Hence, the
performed analysis aimed to examine tools for CE from a marketing expert’s and a
customer’s point of view while referring to the online and offline environment. Although
consumers nowadays use both online and offline CE channels to interact amongst each other
as well as with companies, in the context of wine marketing, we find a distinct preference for
offline activities.
In order to enable effective tools for CE, marketing experts regarded certain conditions to be
pivotal. These are experience and interaction, and linked to this, the personal levels of CE.
Moreover, the target group should be predefined. Interviewees rather referred to CE in the
offline context, where they perceive events and brand communities to be most important. In
particular they see potential for interfaces linking offline and online activities - mobile tools
for instance. Wineries in general were criticised for the lack of ensuring appropriate mobile
websites.
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Regarding the customer’s point of view, they also showed a stronger likelihood to engage in
offline activities. Respondents would be most likely to engage in the evaluation of new
vintages. There was further a consensus between marketing experts and customers
concerning the need for mobile tools, as the second preferred tool was an edutainment app for
wine.
Referring to the limitations, we must add that respondents had lower involvement with social
media and that the online survey was limited to German wine consumers. The pre-study was
also limited to the product wine so far. We recommend that future studies should extend the
scope to cross-cultural approaches as well as to other product categories. Following studies
should consider consumers who can relate to the offline and the online market. Furthermore,
future studies should aim to gain a deeper understanding of the enlisted marketing tools and
how these create engagement (MSI, 2014).
While this exploratory study constituted a pre-study to identify tools to initiate CE, the paper
should persuade the need for further research in this domain, especially on an experimental
basis. To conclude, due to the identification of engagement tools, we can now investigate
their impact on CE as well as on financial indicators and certain marketing constructs.
REFERENCES
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Engagement: A comparison between Australian and French Wine Events”, paper
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Research (AWBR), June 28th - 30th , Geisenheim, Germany, available at:
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The impact of celebrity endorsement on wine brands’ likeability and
purchase intention: A Chinese perspective
Hin Chun Can CHAN
[email protected]
Marc MAZODIER
Hong Kong Baptist University, Hong Kong
[email protected]
Hervé REMAUD
[email protected]
Abstract:
Purpose: Using a celebrity to draw consumer’s attention is a widely use marketing strategy in
China, and many studies have proved the positive effect of celebrity endorsement. However,
little research has been conducted with regards to examining the celebrity endorsement
effects on a wine product using a local (Chinese) and foreign (USA) celebrity.
Design/methodology/approach: 4-fictitious scenario manipulating the nationality of the
celebrity and the country-of-origin of the wine were created in order to measure
respondents’ perceptions of the celebrity and their attitudes and purchase intention toward
the advertised products. A regression analysis is conducted to evaluate the impact celebrity
endorsement has on the brands’ likeability and purchase intention.
Findings: Physical attractiveness is the principle factor influencing positively brand attitude
and purchase intention. In the meantime, trustworthiness and expertise also contribute
positively to brand attitude and purchase intention.
Practical implications: If the target is about increasing brand likability, a well-liked celebrity
can be used. If the marketing objective is about increasing purchase intention, a celebrity
demonstrating physical attractiveness with perceived expertise-in-wine would likely win all.
Keywords: Celebrity, endorsement, China, wine
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1. INTRODUCTION
The general belief among advertisers is that brand communication messages delivered by
celebrities generate a higher appeal, attention and recall than those executed by noncelebrities (Friedman and Friedman, 1979; Kamins, 1990; McCracken, 1989, Chan et al.,
2008, Hung et al., 2011). In the meantime, endorsers having strong creditability source factors,
such as expertise, trustworthiness, and attractiveness, can significantly affect consumer
purchase intention (Ohanian, 1991). Nowadays, celebrities are frequently used to promote
alcoholic products, in the UK (Atkinson et al. 2014) as in many other countries including
China: recent examples include Yao Ming (a worldwide renowned Chinese NBA player),
who launched his own wine label “Yao Family Wines” in November 2011; and Jackie Chan
(a famous Hong Kong movie star) has newly signed up a joint venture agreement with
Kweichow Moutai Group to launch “Jackie Chan’s Classical Collection of Moutai” in April
2012.
Foreseeing wine marketers and wine brand owners dedicate much efforts to understand
Chinese wine consumer’s purchasing preferences, and strive for the key factors influencing
their buying decision. Due to the rise of celebrity cultures, celebrity endorsement in
advertising has widely existed as a widespread strategy of marketing communication in
China. There are several studies fulfilling Chinese wine consumption patterns in general,
though what we know about the perception and purchase intention on Chinese wine
consumers towards a celebrity endorsement on wine products is very little. The main aim of
this study is to investigate the extent celebrity endorsement would influence Chinese wine
consumers towards wine brands’ attitude and purchase intent. Following a brief overview of
the Chinese wine market, we present the two theoretical models used in this investigation.
The research design follows, and then the key findings.
2.1. Overview of the Chinese wine market
China has 4000 years of history in wine making. Despite this history, wine production and
consumption in China has grown very recently. If most Chinese drink Chinese wines, the
upper-middle classes are the major imported-wine drinker that stands for about 18.9 million
of people in China (Wine Intelligence, 2011). Chinese wine drinkers believe that drinking
wine is good for their health (thanks to the Chinese government who promoted wine as a
healthy beverage in 2006 and 2007), particularly red wine. Wine became very quickly a
symbol of a desirable urban lifestyle, which shows sophistication, vitality and social status
in China. Wine drinkers consume premium or expensive wine in order to play wine-smart
and to show off their western-cultural intelligence, exhibit their wealth by being able to
afford the abnormal and impress their friends. Premium drinking practices are active
elements in individual and group identifications, particularly in the social arenas. Wine
consumption in China is not solely a personal drinking purpose, it also involved largely at a
social level (Li et al., 2011): buying gifts to important friends, associates and valued
customers at various occasions, festivals and events. Chinese consumers are more sensitive
to foreign brands and it’s important that the brand should be associated with prestige even
which correspond with high premium cost. The origin of wines is often perceived as an
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indicator of quality (Balestrini and Gamble, 2006). Numbers of researches and studies
support a strong perception of origin and the presentation of origin information in a retail
environment can have great influence against wine consumers (Hu et al, 2008) particularly
that wine as being an “experience good” product (Roth and Romeo 1992; Huber and
McCann 1982; Elliot and Cameron 1994). Interestingly, the literature notes that Chinese
consumers not only display a preference towards foreign brands/products because of the
perceived quality, but also prefer foreign advertising to local advertising (Kwok, Uncles and
Huang, 2006; Tai and Pae, 2002).
2.2. The Source Attractiveness Model
Attractiveness includes various attributes such as intellectual skill, personality properties,
lifestyle or athletic prowess that consumers might perceive in a celebrity endorser (Erdogan,
1999). Likeability is the “affection for the source as a result of the source’s physical
appearance and behaviour” (McGuire, 1985, 239). In that perspective, celebrities need to be
at least well known and admired in the public eye (Belch & Belch 2001). Erdogan (1999)
provides a good summary of this phenomenon: attractive celebrity endorsers can enhance
attitude towards advertisement, the brand or the product. But results about behavioural
intentions are not consistent and therefore no generalization can be made. Many researchers
reveal that consumers have a tendency to form positive stereotypes about attractive
individuals. Compared to their unattractive counterparts, physically attractive
communicators (celebrities) are more successful at changing beliefs (Baker and Churchill,
1977). It is therefore important to test the validity of the Source Attractiveness Model in the
current study. This leads to the first hypothesis H1: The greater the attractiveness of the
endorser the greater the likeability of the brand (a) and its purchase intention (b).
2.3. The Source Credibility Model
“Source credibility” is used commonly to entail the communicator’s positive attributes that
affect the recipient’s acceptance of a message. (Ohanian, 1990). Furthermore, the source
needs to be trustworthy, believability, honestly and ethically founded (Belch & Belch,
2001). Choosing an appropriate celebrity to endorse a product or brand is often done
successfully when the endorser and brand share similar characteristics (Till & Busler, 1998).
An extensive body of literatures has explained that a source which is highly credible have
been found to be more persuasive and believable than less credible models (Atkin & Block,
1983; Erdogan, 1999). The same is reflected in the source credibility model, which contends
that the effectiveness of a message displayed depends on a perceived level of trustworthiness
and expertise of the endorser (Erdogan, 1999; Ohanian, 1991). McCracken (1989) defines
expertise as the endorsers’ perceived capability to state convincing statements. An endorser
exhibiting expertise and reliability is credible and, to that extent, persuasive. Endorsers are
perceived as experts if they have great knowledge and experience about the product and the
necessary skills regarding the endorsed item (Erdogan, 1999). Trustworthiness is the degree
of confidence in the communicator’s intent to communicate the assertions he/she considers
most valid and consists of honesty, integrity and believability (Ohanian 1991). Hence, it is
hypothesized: H2: The greater the trustworthiness of the endorser the greater the likeability
of the brand (a) and its purchase intention (b); H3: The greater the expertise of the endorser
the greater the likeability of the brand (a) and its purchase intention (b)
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3. RESEARCH PROTOCOL
3.1. Research design
The objective is to measure the impact a celebrity would have on the likeability and
purchase intention of a brand. A 4-fictitious scenario (Table 1) was designed and addressed
to about 2500 Chinese respondents. The nationality of the celebrity and the country-oforigin of the wine are manipulated in order to measure respondents’ perceptions of the
celebrity and their attitudes towards the advertised products.
Table 1: Scenario set up framework
Chinese-Celebrity +
Domestic (Chinese)
Wine product
Chinese-Celebrity +
Imported (US) Wine
product
US-Celebrity +
Domestic (Chinese)
Wine product
US-Celebrity +
Imported (US) Wine
product
Respondents would first be asked to rate their attitude toward the brand based on their
perception towards the scenario-ad by the 7-point scale, and then to rate the endorser
characteristics using a 5-point likert-scales (attractiveness, trustworthiness and expertise-inwine); then finally the respondents would be asked to rate their purchase intention based on
the standard Juster-scale.
3.2. Endorsers, Products and Advertisement
For the persistence and to avoid pre-judgments, all endorsers are adhered to be recognized
actors/actresses, sharing similar background, image and style. To endorse a general
trustworthiness image, the authors carefully screen out the young spectrum and focus on actor
aged between 50 to 58 years old. In order to eliminate the preference (or bias) in prejudice
and/or duplication on profession setting and identity, the choice of celebrity model-image
would all be actors who is popular among Chinese society and has no associational effect to
alcoholic brand in the real world. Based on a preliminary study (not presented here), Ren DaWah and Nicholas Cage have been selected. Both are recognized in their profession as
award-winnings actors.
Two fictitious wine brands were produced for this study. To avoid personal preference (or
bias), a single varietal wine was selected. Cabernet Sauvignon is one of the world’s most
widely recognized red wine grape varieties. Two products, differing only on their country-oforigin should features the same grape varietal (Cabernet Sauvignon) and shared a similar
packaging (label design), would be used to analyze the impact of different endorser types: 1)
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Domestic Product – Heavenly Made Vineyard 天上品葡萄园 (Shandong, China); 2)
Imported Product – Sunshine Valley Vineyard 阳光谷葡萄园 (California, USA).
Four fictitious color images were developed for this study (see Table 1). Each wine product
would be advertised by one endorser type individually. The communication tool used was a
print advertisement, due to its simplicity and easiness to incorporate in an online
questionnaire. Product’s brand logo, packaging, and color tone were adopted on a similar
design touch while only emphasis on the difference of its country-of-origin. The overall
design for the advertisements would be identically the same except on the endorser and
endorser quotes. Handling for the advertisement images were equal on all four scenarios – to
highlight the difference on the endorser type and the product’s country-of-origin. The
endorser quotes were made to enhance the advertising message for the respondents in the
purpose of measure the endorser effect. Similarly the model images, same cautions would be
applied carefully on the presentation of these “quotes”. An overall approach of simple,
straightforward, same but identically different prints layout was retained.
3.3. Data collection and analysis
The authors have chosen a China web-based survey system company to host and manage the
survey administration. The company claims that they have a powerful database support
engines that currently have over 2.6 million sample sources. These 4-scenario ads, together
with the pre-set questionnaires, were posted online for 21 days to select randomly and
achieve a sample size of 2000 respondents. In consideration with the study objectives, the
authors decided to conduct the survey in single language: Chinese. The sampling frame is
Chinese online user, and, in order to obtain an exhaustive nationally representative sample,
no prior screening has been set forth. A total of 2041 respondents formed by the four-scenario
groups (S1, n=525; S2, n=501; S3, n=509; S4, n=506) participated in the survey. In the
meantime, 46 under age respondents were taken out. Further 126 cases were removed from
the database for the non-wine-drinker and ineffective cases due from missing values. The
final sample includes 1869 respondents. To test hypothesis 1 to 3, descriptive analysis,
ANOVA and regression analysis were conducted. “Attractiveness”, “Trustworthiness” and
perceived “Expertise in wine” are the three independent variables whereas attitudes toward
the brand (likeability) and purchase intent are the dependent variables. Analysis were
conducted using SPSS software.
4. RESULTS
4.1. Characteristics of the sample
The final sample of 1869 respondents includes 53% of male and 47% of female, all have
drink wine at least once in their life. People who responded to the survey are located in
various provinces of China (34 in total), including Hong Kong and Macau. 1309 respondents
(69.89%) are aged between 26 and 40. Male respondents with income between 8001-15000
yuan represent the highest sample size at 348 cases (18.6%) whilst highest sample size on
female respondents are 297 cases (15.84%) with income range between 3001-5000 yuan.
They jointly represent a sample size of 645 constituting 34.44% of the sampling. About 64%
of the respondents declared ‘liking’ or ‘liking a lot’ wine.
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4.2. Results
Hypotheses H1a, H2a, H3a use attitudes towards the brand as dependent variable. The first
result shows that the attractiveness of the endorser (Beta=0.229 and p≥0.001) has the
strongest relationship contribution to the dependent variable (see Table 2), followed by the
perceived expertise (Beta=0.110 and p≥0.001). “Attractiveness” and “Perceived expertise in
wine” have both a significant impact towards the “Brand likability”. Trustworthiness has the
lowest impact (beta=0.062). Hence, hypothesis H1a, H2a and H3a are supported with the
findings. The results suggest a positive strong association between perceived
“Attractiveness”, “Trustworthiness” and perceived “Expertise-in-wine” of celebrity
endorsement with brand likability.
Table 2: Statistical analysis of hypotheses H1a, H2a, H3a
Hypotheses H1b, H2b, H3b use the purchase intention towards the brand as dependent
variable. Results indicate that all three independent variables have a significant impact on the
dependent variable (Table 3).
Table 3: Statistical analysis of hypotheses H1b, H2b, H3b
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Perceived “Attractiveness”, again, has the strongest positive association with purchase intent
among the three independent variables (Beta=0.235), followed by perceived
“Trustworthiness” (Beta=0.211) and perceived “Expertise-in-wine” (Beta=0.175). Therefore,
hypotheses H1b, H2b and H3b are all supported. It means that the greater the perceived
“attractiveness”, “trustworthiness” and perceived “expertise-in-wine”, the greater the
purchase intention. Additionally, perceived attractiveness of the celebrity endorser remains
the highest factor between trustworthiness and perceived expertise-in-wine, impacting the
purchase intention of Chinese wine consumers.
5. DISCUSSION and CONCLUSIONS
Celebrity’s physical attractiveness is perceived as the most prominent factor compares to
trustworthiness and perceived expertise. As such, attractive celebrity can elicits more
favourable attitudes towards the advertisements in both brand attitude and purchase intention
in a Chinese wine market perspective. Source credibility has been proposed as an important
antecedent to attitudes toward an advertisement and ultimately, advertising effectiveness,
whereas physical attractiveness is liked more and has a positive impact on opinion change
and product evaluations. Trustworthiness was not established as a significant determinant of
respondent’s intention to purchase since advertising viewers do not have a high level of
trustworthiness towards celebrities in paid commercials.
For marketing managers, and concerning the efficacy of celebrity endorsement, it seems more
important to identify the marketing targets. If the target is about increasing brand likability, a
well-liked celebrity should come foremost before considering perceived expertise and
trustworthiness aspects. If the marketing objective is about increasing purchase intention, a
celebrity demonstrating physical attractiveness with perceived expertise-in-wine would likely
win all. Additional analyses suggest that if promotions were to be made on an imported
brand, collaboration with an attractive local (Chinese) celebrity would be a good choice as
this would elicit more favourable attitudes towards the advertisement; and at the same time,
the local celebrity would benefit from a favourable image.
The findings indicate that neither local nor foreign celebrity has made significantly influence
on brand attitude and purchase intentions towards a domestic advertised brand. COO factor
still constitutes an important or dominant role comprehend by the wine consumers in China.
Considering the growth of domestic supply in the past few years, wine productions in quality
has been improved and leads to increments on local consumptions, different findings might
then be seen in the future.
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Learning wine thanks to powerful MOOC emulation
Jean-Éric Pelet
KMCMS.net, ISC Paris, IAE-IEMN Nantes University, France
[email protected]
Benoît Lecat
California PolytechnicÉ State University, USA
[email protected], [email protected]
Stéphane Fauvy
ESSCA School of Management, LUNAM Université, Angers, France
[email protected]
Abstract:
Purpose - MOOCs (Massive Open Online Courses) have gained popularity for e-learning
purposes. Effectiveness depends on platform interface design and management which should
create student cohesiveness and optimize collaboration.
Design/methodology/approach - A MOOC prototype is developed and E-learning
applications pilot-tested for one semester with French business school graduate students.
Findings - Students use a mobile supported e-learning environment and report their
experiences through writing a synthesis, building a Content Management System (CMS) and
elaboration of a content curation system.
Practical implications - Students evaluate learning experience using a self-determination
scale to measure the effectiveness of a prototype MOOC to learn wine marketing basics.
Keywords: MOOC, wine, social learning, mobile learning, self-determination
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1. INTRODUCTION
The “Learning For All” movement is stimulating active debates in the education space
around the world (Pelet et al., 2015). In this crowded area, schools are competing to become
leaders in viticulture and winemaking education. Current and future professionals across a
wide range of disciplines worldwide want to study wine, increasingly using MOOCs, while
pursuing first-hand experience in the wine industry, The reasons to use a MOOC vary and
include 1) cutting costs, 2) having control of time 3) obtaining credit within a university or in
business 4) building a social network rapidly. As the wine industry continues to grow and
transform, MOOCs on wine represent an emerging way of learning and have the potential to
become a global leader in research and education about the business of wine.
Since the emergence of diverse online supports, MOOCs can be very interactive and allow
students who are not sitting in the physical class, which is a large part of instruction and
testing in current non-university certificate programs, to experience a dynamic presentation.
Further, aligning university credit with a MOOC keeps students focused on completion. In
the European Union, students pursue MOOC courses through ECTS (European Credits
Transfer System), which validates courses for degree credits. MOOCs are also credit-worthy
in other international academic degree programs. In the wine industry, there are multiple
examples of online supports for MOOC and e-learning through social media, RSS feeds,
video, discussion, podcasts and testing examples in wine marketing that engage the learner
through interactivity. While some offer industry accreditation, few include university credit.
(See Appendix A for a review).
With wine as a fast-growing industry, as well as a social pleasure, there is an important need
for specialized classes on wine at the bachelor and master levels for students who want to be
part of the wine industry (viticulture, enology, sales and marketing, business administration,
logistics, economics, law, science etc.). Such classes also appeal to stakeholders in the wine
industry and wine lovers seeking continuing education. With the wide range of wine
programs available, we don't know if the students get better results because of their work or
their own-learning capacity when they are alone or just because some online programs might
be of better quality. In order to better understand this phenomenon, a survey will begin in
September/October 2015 based on a MOOC that is in progress.
Even if some wine regions “urgently need to improve the business and management skills of
its professionals at the background of profound changes impacting the global higher
education industry” according to Zalan & Lewis (2014), academic references are relatively
scarce.
This paper questions what needs to be taken into consideration to build and implement a new
learning environment, like a MOOC, leading to creating and expanding the pool of
professionals in the wine ecosystem. In order to discover the interest for such a learning
format, a MOOC on the marketing of wine has been realized, integrating the main assets of a
MOOC (social media, RSS feeds…). In order to evaluate whether learners have appreciated
the way they have learned through the MOOC, the Self-Determination Theory (SDT) has
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been initiated. It is a motivation theory concerned with supporting our natural or intrinsic
tendencies to behave in effective and healthy ways (SDT, 2015).
This article gives an overview of the development and application of MOOCs. It integrates
social media and curation tools as a hot topic in e-learning with the use of electronic devices
and free Internet tools. The paper focuses on learning as a collaborative process embracing
one of the primary characteristics of MOOCs: collaborative development and constructivist
learning situations. Constructivist learning is based on students' active participation in
problem-solving and critical thinking regarding a learning activity which they find relevant
and engaging. They are "constructing" their own knowledge by testing ideas and approaches
based on their prior knowledge and experience, applying these to a new situation, and
integrating the new knowledge gained with pre-existing intellectual constructs (Usero, 2012).
Collaborative learning has gained a worldwide role in educational strategies. Computersupported collaborative learning (CSCL) is a pedagogical approach within learning that takes
place via social interaction using a computer or through the Internet (Zheng et al., 2014).
Many emerging technologies offer new ways of teaching and learning, such as ubiquitous
learning technologies, gesture-based computing, augmented reality technology, and learning
analytics. Indeed, collaborative learning aims to promote students’ individual cognition,
group cognition and community cognition through the use of appealing, easy-to-use and
instantaneous tools, which are making learners more experiential, interactive, social,
multitaskers, structured, relevant, and technology immersed (Zheng et al., 2014).
Accompanying CSCL, e-learning is a notion that is a pertinent factor in today's education
(Pelet & Papadopoulou, 2013 and Pelet, 2013). Eurostat data from 2012 consistently suggests
that mobile devices will be increasingly used in educational institutions. We are in the
process of hybridization as disruptive, ubiquitous technologies continue to forge new models
of popular education. The instruction of the masses via e-learning is essentially "knocking
down the walls" of university campuses (Lewin, 2012).
In response to the crucial problem of high tuition fees (Bowen, 2012), a technological shift
towards digital learning environments is a partial solution. MOOCs, which are part of a
global open education initiative or a for-profit education model, may be a catalyst in the
process of re-imagining higher education or re-enchanting e-learning. There is, however,
substantial criticism and skepticism concerning their low completion rates and their
unsustainable current structures.
2. REVIEW OF LITERATURE
2.1. MOOCS: PRESENTATION AND DEFINITION
MOOCs can be defined as aggregate classes from multiple organizations, universities and
schools, offered on a single digital platform and delivered to thousands of recipients
simultaneously. There are many courses on a wide array of themes and topics available on
MOOCs, most of them for free or at a very low cost. MOOCs offer two approaches to
instructional design: 1) peer-review, group collaborations through “crowd sourcing” or 2)
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automated feedback and self-assessments (Kop, 2011). One of the problems encountered by
students is the rather limited possibility of interacting with other students (Rivard, 2013a) and
the lack of a teacher-student relationship.
2.2. E-LEARNING
Design of an e-learning platform is of paramount importance for influencing learner
interaction and behavior as well as the overall success of the learning experience. Shapira &
Youtie (2001) state that teachers can use technology to encourage or force students to prepare
for class and use the contact hours to co-construct knowledge rather than to deliver it.
2.3. MOBILE LEARNING (M-LEARNING)
Wireless mobile devices should be considered complementary to portable computers. The
reasoning behind this logic is simple, wireless mobile devices are excellent tools for
collaborative learning on the go, but their smaller screen sizes and type displays make them
less effective tools for prolonged educational sessions. It is the natural evolution for
institutions that have already integrated e-learning into their educational practices.
Wireless communication is in the process of transforming learning environments and
allowing students to optimize their down time. One of the most interesting aspects of Mlearning is that users have the capacity to make documentations while they are in the field
thus bridging the gap between theoretical and practical knowledge (Setaro, 2001; Stone et al.,
2002). The M-Learning environment offers interactive settings in which students can
communicate synchronously or asynchronously without temporal-spatial boundaries.
Interactive social tools have broken the barrier between the academic and private spheres, and
learners have higher retention rates when they enjoy taking part in the online learning game
(Pelet 2013). The potential for integrating this technology into learning environments
intensifies despite limitations of handheld devices. Studies reveal that students are generally
satisfied with M-Learning systems and consider them as a potentially useful learning tool of
the future (Motiwalla, 2007).
2.4. SOCIAL MEDIA AND E-LEARNING
Universities are expanding their e-learning capabilities to serve larger populations of students
whose expectations embrace modern technology and who expect, perhaps even demand, a
modernized educational experience built on the latest technology and 'social networks',
according to Liebowitz and Frank (2011). Social networks such as Facebook have potentially
positive benefits to teaching and learning, particularly with the development of educational
micro-communities (Bosch, 2009). Certain studies show that the integration of microblogging into the educative experience successfully promoted active and continual feedback
from students (Pelet & Papadopoulou, 2013).
As traditional teaching approaches hybridize towards digital integration, educational systems
will continuously adapt courses to student behavior and use of social media outside the class.
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In the cycle of expansive learning, the discovery of new technological usages leads to the
development of new capacities that foster lifelong learning.
The digital age has fostered new relationships between teachers and learners: rather than
passively and traditionally digesting and memorizing information, students are interested in
education that corresponds with individualized information needs (Peters, 2007). Social
media applications represent a form of emerging social constructivist e-learning tools
(Cochrane, 2006): The consumption of social media has become an informal learning habit in
the cycle of expansive learning. With a little organizational structure, social media
applications can easily evolve towards becoming venues where formal educative processes
take place.
2.5. SELF-DETERMINATION THEORY
In Self-Determination Theory, Deci & Ryan (1985, 2000) distinguish different types of
motivation based on the different reasons or goals that give rise to an action. The most basic
distinction is between intrinsic motivation, which refers to doing something because it is
inherently interesting or enjoyable, and extrinsic motivation, which refers to doing something
because it leads to a separable outcome. Over three decades of research has shown that the
quality of experience and performance can be very different when one is behaving for
intrinsic versus extrinsic reasons. Intrinsic motivation has emerged as an important
phenomenon for educators because it results in high-quality learning and creativity; it is
especially important to detail the factors and forces that engender versus undermine it
(Amabile et al., 1976). The latest developments about extrinsic motivation highlight that
extrinsic motivation is argued to vary considerably in its relative autonomy and thus can
either reflect external control or true self-regulation. Understanding these different types of
extrinsic motivation, and what fosters each of them, is an important issue for educators who
cannot always rely on intrinsic motivation to foster learning (Ryan & Deci, 2000).
3. METHODOLOGY
In order to measure the efficiency of the MOOC, a MOOC on wine marketing has been
created on a Wordpress platform, linked to social media and other widgets enabling the
student to know exactly what he/she is doing and time remaining before submitting his work.
The learner can chat with his peers and consult the literature as well as read any comments
made by colleagues on the platform. It is available here: http://kmcms.net/moocwine.
A link to a questionnaire containing the self-esteem measures is available, once the course is
conducted, in order to assess the quality of the course, as well as variables embedded in the
questionnaire. The questionnaire that will be used contains the following:
Perceived autonomy Support enables to know how people have felt about the experience
and the relationship with instructors. Example:
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My instructor made sure I really understood the goals of the course and what I need to do
1
Strongly
disagree
2
3
4
Nor agree,
nor disagree
5
6
7
Strongly
agree
Treatment Self-Regulation Questionnaire (TSRQ) assesses the degree to which a person’s
motivation for a particular behavior or set of behaviors is relatively autonomous or self
determined. This scale has 15 items: six that assess autonomous motivation, six that assess
controlled motivation, and three that assess a motivation. It enables easy comparison of
different reasons for doing something and to measure how each sentence is true.
4. RESULTS OF THE EXPLORATORY STUDY
Results will be presented during the conference but we can already posit that the fact that
CMS supported by mobile devices is a pertinent factor in the success of this educational
initiative. Its ubiquitous form and the responsive design of the websites offer an easy-to-read
interface which facilitates the memorization of content. It also enables students to find and
share information, ask questions and get responses easily, without temporal-spatial barriers.
Our post-course survey provides results on student satisfaction and overall experience using
the MOOC interface and its social media components. As shown in Table 1, students overall
gave positive feedback based on previous research conducted by Pelet et al., (2015). The
highest satisfaction was related to ease-of-use and learning compared to other courses.
Results indicated that 58% of the students who participated in this digital educational setting
agreed or strongly agreed that it was an accessible form of pedagogy and that it was a
satisfactory experience. Student productivity was enhanced due to the flexible nature of the
courses. We will compare the results of this new research to the ones obtained with previous
research.
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Table 1: Questions/answers related to the student's satisfaction and overall experience
using the MOOC interface and its social media components
Student feedback
N
Mean
*
Std.
Dev
Min
Max
Did this form of teaching appear accessible for you
19
3.7
0.7
3
5
Documents submitted and teaching materials were
satisfactory
19
3.1
1.1
2
5
The number of exercises and illustrative examples
supporting the course was sufficient
19
2.7
1.1
1
5
Do you feel that the workload was reasonable
19
3.7
0.9
2
5
According to you, your level of involvement in this
course (homework, participation...) was enough
19
3.9
1.0
2
5
Do you consider that your prerequisites were sufficient
19
2.9
1.0
2
5
Ease of use and learning compared to other courses
19
4.0
0.9
2
5
Was the course adequate in relation to professional
practice
19
3.9
0.6
3
5
Was this form of learning accessible for you
19
3.7
0.7
3
5
In general, did you find this form of education
satisfactory
19
3.7
0.9
2
5
*1 = strongly disagree to 5 = strongly agree
This paper presented an exploratory analysis around the use of a MOOC for learning wine
marketing and M-Learning with strong implementation of social media content creation tools
in the context of university business school courses. As social media usage increases, we find
that it is in the best interests of students to integrate M-Learning situations into traditional
higher education. Our study shows that the use of a mobile supported MOOC facilitated
mobile knowledge management, and created a flexible and effective learning environment.
Students who were more fluent in the operation of the various development mechanisms
provided support to the others as tech-savvy “technological stewards”. This type of leaderoriented behavior is typical in the digital learning environment; it empowered students with a
sense of gratification and motivation while fostering a sense of a united academic microcommunity. Paradoxically, students developed autonomous working habits, as well as
community oriented collaborative working skills.
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In the continuously evolving educational sphere of the 21st century, institutions and educators
are in a situation where they must adapt to the widespread use of ICT and unbound
themselves from the constraints of strict traditional education. Social media and mobile
Internet technologies reinforce the potential for effective communication. The computermediated setting facilitates the creation of visual representations of information, reducing
cognitive workload required by learners to understand knowledge in a more expedient
manner. The implementation of digitized learning is reciprocally beneficial to teachers as
evaluation processes become increasingly automated and visual. It's a win-win situation!
Furthermore, only efficient universities will survive: MOOCS can be a tool dedicated to the
optimization of the physical size of a campus or in other words to limit physical expansion,
which could highly contribute to the increase of the profitability and from a sustainable point
of view, avoid building new facilities while increasing the number of students.
6. FUTURE RESEARCH
Future research will be very interesting for educators and thought leaders who are intrigued
by MOOCs, but who have not committed to implementing them in their own educational
curriculums. Future research will help to shed light on the uncertainties surrounding MOOCs
and embrace their potential to be a transformative educational innovation of the 21st century.
Results from this exploratory study demonstrate that success can be achieved with the use of
MOOCs in combination with social media constructivist tools (i.e. website development and
content curation applications) in a mobile-supported format. Additional research is to be
conducted with the objective of identifying motivating factors behind student commitments
and overall success in e-learning and M-learning environments. Future research will also
strengthen the external validity of our preliminary results, which indicated a successful
outcome with the use of social media constructivist tools for the purpose of knowledge
management in a mobile supported MOOC scenario.
Acknowledgements: The authors thank Delphine Jacquet, PhD student at NEOMA Business
School (France) for her project help and Kathleen Buckley, journalist on wine and editor.
REFERENCES
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subsequent intrinsic motivation. Journal of Personality and Social Psychology, 34, 92–98
Bosch, T. E. (2009). Using online social networking for teaching and learning: Face book use
at the University of Cape Town. Communication, 35(2), 185–200.
doi:10.1080/02500160903250648
Bowen, W. G. (2012). The “cost disease” in higher education: Is technology the answer. The
Tanner Lectures Stanford University. Retrieved from
http://edf.stanford.edu/sites/default/files/Bowen%20lectures%20SU%20102.pdf
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Cochrane, T. (2006). Learning with wireless mobile devices and social software. Who’s
Learning? Whose Technology? Proceedings Ascilite Sydney 2006. Retrieved from
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Deci, E. L., & Ryan, R. M. (1985). Intrinsic motivation and self-determination in human
behavior. New York: Plenum.
Kop R. (2011). The challenges to connectivist learning on open online networks: Learning
experiences during a massive open online course, Vol 12, No 3 (2011), The International
Review of Research in Open and Distance Learning, Special Issue - Connectivism: Design and
Delivery of Social Networked Learning, 19-38.
Lewin, T. (2012). Instruction for masses knocks down campus walls. New York Times,
Newspaper Article. Retrieved from http://massiveopenonlinecoursesrepository.yolasite.com/resources/12_04-04-12-Tamar%20LewinInstruction%20for%20Masses%20Knocks%20Down%20Campus%20Walls-NYT.pdf
Liebowitz, J., & Frank, M. S. (2011). Knowledge management and e-learning. Boca Raton,
FL: Auerbach Publications. Retrieved from http://dx.doi.org/10.1201/b10347
Motiwalla, L. F. (2007). Mobile learning: A framework and evaluation. Computers &
Education, 49(3), 581–596. doi:10.1016/j.compedu.2005.10.011
Pelet J.-É. and Papadopoulou P. (2013). Handbook of Research on User Behavior in
Ubiquitous Online Environments, IGI Global: http://www.igi-global.com/publish/call-forpapers/call-details/841 - http://www.kmcms.net/Doc/Call/Ucommerce/
Pelet J.-É. (2013). E-learning 2.0 Technologies and Web Applications in Higher Education,
IGI Global: http://www.igi-global.com/publish/call-for-papers/call-details/798 http://www.kmcms.net/Doc/Call/Elearning/
Peters, K. (2007). M-Learning: Positioning educators for a mobile, connected future.
International Review of Research in Open & Distance Learning, 8(2). Retrieved from
http://www.irrodl.org/index.php/irrodl/article/view/350/894
Rivard, R. (2013a). Coursera's contractual Elitism. Inside Higher Education (online edition)
Ryan, R. M., & Deci, E. L. (2000). Self-determination theory and the facilitation of intrinsic
motivation, social development, and well-being. American Psychologist, 55, 68-78.
SDT (2015). « Self Determination Theory », Retrieved from the Internet on August, 2015 at
http://www.selfdeterminationtheory.org/
Setaro, J. (2001). If you build it, will they come? Distance learning through wireless devices.
Unisys World, 12-14.
Shapira, P. & Youtie. J. (2001). Teaching with Internet and multimedia technologies: insights
from an online seminar on industrial modernization. Journal of Planning Education and
Research, 21, pp. 71-83.
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Stone, A., Briggs, J., & Smith, C. (2002). SMS and interactivity-some results from the field,
and its implications on effective uses of mobile technologies in education (pp. 147 –151). IEEE
Comput. Soc. doi:10.1109/WMTE.2002.1039238
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May, 2012, retrieved from the Internet at: http://iserotope.com/educational-theory-a-movetoward-constructivism/ the 29th of October, 2015
Zalan, T., & Lewis, G. (2014). Wine Business Education in a Networked World, 8th Academy
of Wine Business Research International Conference, June 28th-30th, 2014, Geisenheim,
Germany. AWBR 2014 conference proceedings, ISBN 978-3-00-047628-0
Zheng L., Junfeng Y., Wei C., Ronghuai H., (2014). Emerging approaches for supporting
easy, engaged and effective collaborative learning, Journal of King Saud University - Computer
and Information Sciences, Volume 26, Issue 1, Supplement, Pages 11-16.
APPENDIX A
Sample: Certificate, Institution
MOOC/eLearning
URL
Internationally recognized
INTL/UK_Wine & Spirit Education Trust
http://www.wset.co.uk
Yes
http://www.wsetschool.com/whichcourse/online-2
INTL/UK_Institute of Masters of Wine
http://www.mastersofwine.org
Universities
AU_University of Adelaide
http://www.agwine.adelaide.edu.au
No
AU_University of Melbourne
http://www.unimelb.edu.au/
Yes
https://www.coursera.org/unimelb
AU_Charles Sturt University
http://www.csu.edu.au
Yes
http://www.csu.edu.au/distanceeducation
CA_Brock University
http://www.brocku.ca/ccovi
No
CA_George Brown College
http://coned.georgebrown.ca
Yes
DE_Geisenheim University http://www.hsgeisenheim.de/
No
FR_Bordeaux University / ISVV
http://www.oenologie.u-bordeaux2.fr/
No
http://coned.georgebrown.ca/coursesand-certificates/distance-education/
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FR_Burgundy School of Wine & Spirits
Business http://www.swsb.eu
No
FR_Kedge Business School
http://www.kedgebs.com
No
FR_University of Montpellier
http://www.univ-montp1.fr
No
NZ_Eastern Institute of Technology
http://www.eit.ac.nz 501
Yes
UK_Plumpton College
http://www.plumpton.ac.uk
No
UK_Royal Agricultural University
http://www.rau.ac.uk
No
US_University of California Davis
http://wineserver.ucdavis.edu
No
US_University of California Fresno
http://www.fresnostate.edu/jcast
No
US_Cornell University
http://www.nysaes.cornell.edu/
No
US_Sonoma State University Wine
Business Institute
http://www.sonoma.edu/sbe/winebiz
No
US_Johnson & Wales University
http://www.jwu.edu.edu
Yes
http://eitonline.eit.ac.nz/course/index.php
https://online.jwu.edu/
*Source: http://www.jancisrobinson.com/learn/wine-courses
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Wine and website loyalty:
A model of sales promotion and service attributes
Jean-Éric Pelet (Corresponding author)
KMCMS.net, ISC Paris
[email protected]
Benoît Lecat
California Polytechnic State University, USA
[email protected]
Jashim Khan
University of Surrey, United Kingdom
[email protected]
Linda W. Lee
KTH Royal Institute of Technology, Sweden
[email protected]
Debbie Vigar-Ellis
University of KwaZulu-Natal, South Africa
KTH Royal Institute of Technology, Sweden
[email protected]
Marianne McGarry Wolf
California Polytechnic State University, United States
[email protected]
Sharyn Rundle-Thiele
Griffith University, Australia
[email protected]
Androniki Kavoura
Technological Educational Institute (T.E.I.) of Athens, Greece
[email protected]
Vicky Katsoni
Technological Educational Institute (T.E.I.) of Athens, Greece
[email protected]
Anne Lena Wegmann
DLR Rheinpfalz, Weincampus Neustadt, Germany
[email protected]
251 | P a g e
Abstract:
Purpose - This paper examines the relationship between feelings toward buying wine on
mobile phones and m-commerce website loyalty by examining a) the mediating role of sales
promotion and b) the moderating role of service attributes of the m-commerce websites.
Design/methodology/approach - The study comprised a questionnaire among 2754 responses
from six countries (France, Germany, Greece, South Africa, United States and Canada). Nonprobability criterion-based purposive sampling was used, screening for legal drinking age and
ownership of a smartphone.
Findings - Results show that sales promotion mediates the relationship between feelings
towards buying wine on mobile phones and m-commerce website loyalty
Practical implications - Wine producers and retailers should consider the use of sales
promotion to enhance sales and loyalty to m-commerce websites.
Keywords: M-commerce, wine, loyalty, affective states
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1.
INTRODUCTION
With more than 139 million results produced by Google when the words "purchase" and
"wine" are searched together, it is clear there is enormous competition for wine producers or
retailers on the Internet. According to eMarketer (2015), total retail sales are growing slowly
but steadily in the US. Although e-commerce is growing more quickly than offline sales, ecommerce is expected to rise only slightly as a share of the total, from 7.2% this year to 9.8%
by 2019. Mobile e-commerce is an even smaller proportion, accounting for a tiny 1.6% of all
retail, and by 2019, its share is projected to be only 2.7% of the total. Understanding
consumers’ perceptions of mobile commerce and the factors that might positively and
negatively affect these perceptions is thus important for wine marketers.
The subject of the mobile interface connecting the user to an online store (e.g. smartphones or
tablets), remains an important subject that has not been adequately addressed. Usage growth
of mobile devices, specifically of smartphones is favouring the surge in mobile shopping
(Lenhart et al., 2011). Lee et al. (2015) propose that factors such as mobile phone simplicity
and interactivity are enhancing the user experience, leading to positive perceptions about
using a mobile phone for m-commerce. Some recent research has focused on the adoption,
acceptance and use of m-commerce; the utilitarian and hedonic factors that might influence it
(Li et al., 2012); and its customer satisfaction (Choi et al., 2008; Trevinal & Stenger, 2014).
Lee et al. (2015) also examined customers’ positive involvement as a precursor to website
loyalty where distrust mediates customer perceptions of various web features in the process
of building customer loyalty.
This paper examines the relationship between feelings toward buying wine on mobile phones
and loyalty toward the wine producer/retailers’ m-commerce websites. Specifically, the study
proposes that sales promotion mediates the relationship between feelings toward buying wine
on mobile phones and loyalty toward m-commerce websites and that the indirect effect of
sales promotion is dependent on service attributes of the wine producer/retailer’s mcommerce website. The study is organised as follows. First we conceptualise online sales
promotion, service delivery attributes of m-commerce websites, the affective state of buying
wine on mobile phones and m-commerce website loyalty. We then develop the theoretical
model and hypotheses. The moderated-mediation model is then tested using 2754 responses
from six countries. Finally, results and analysis are interpreted and discussed, then the
theoretical contribution and practical implications of the study are discussed.
2.
DEVELOPMENT OF THE THEORETICAL FRAMEWORK
This section starts with a discussion of the key constructs being investigated i.e. online sales
promotion, feelings towards buying wine on mobile phones, m-commerce website loyalty
and service attributes on websites, and then develops the theoretical model.
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ONLINE SALES PROMOTION
Online wine sales currently represent less than 5% of total wine sales in developed countries
(Higgins et al., 2014), although growth in online sales is expected. In a study across
numerous industries the most frequently used online advertising methods were email ads,
social media and webpages (Leeflang et al., 2014). Of the various promotional tools, online
ads have been found to have a significant positive effect on sales (Peng et al., 2014). In the
US wine industry specifically, Thach et al. (2014) found that online newsletters, social
media, and electronic word-of-mouth were the most important online sales promotions.
Online sales promotion offers practical advantages (temporal and spatial), financial
advantages (through comparing prices), and hedonic ways of consuming (Eroglu et al.,
2001). Thus, positive feelings towards buying wine via mobile phonescould be stronger when
there sales promotion is present on the sellers’ website.
FEELINGS TOWARD MOBILE-WINE PURCHASING
When people are feeling positive, they tend to have more favourable expectations for the
future (Masters & Wyndol, 1976). We expect that if consumers have positive feelings about
buying wine using mobile then they are more likely to make purchases from a wine firm or
seller’s website. This is consistent with Wu et al.’s (2008) study suggesting that emotions are
a significant predictor of purchase intention.
M-COMMERCE WEBSITE LOYALTY
Previous research has suggested that customer loyalty should be the consequence of
perceived value, customer satisfaction, trust and habit (Lin & Wang, 2006). Online loyalty or
e-loyalty has been defined as a consumer’s intention to buy from a website or to visit it again
(Cyr et al., 2006; Flavián et al., 2006; Yoon et al., 2008). Buying intentions therefore,
provide a measure of attitudinal loyalty, defined as the level of customer’s psychological
attachment, willingness to recommend the service provider and engage in positive word-ofmouth (WOM) communications (Kaur & Soch, 2013). It follows then that satisfied customers
who are members of a wine group or have liked a wine fan page, for example, would be
willing to engage in WOM communications. This type of loyalty includes a degree of
dispositional commitment associated with repeat purchase behaviour (Chaudhuri &
Holbrook, 2001).
Service attributes of wine website
In our conceptualisation, we have taken into account that wine is heavy, fragile and difficult
to deliver, requiring special care from transporting companies. It is important for e-commerce
orders to attain on-time delivery to maintain customer trust and satisfaction (Pelet et al.
2015). Bressolles & Durrieu (2011) suggest that the main components of e-service quality are
information, ease of use, and the design, reliability and security of the website. Consistent
with these components, we conceptualise that the service delivery attributes of a wine e-
254 | P a g e
commerce website include follow-up communication, on-time delivery, tracking service and
low delivery charges.
We developed a moderated mediation model that examines sales promotion as the mediating
mechanism and service attributes of the website as a moderating variable with regards to the
effect of feelings toward mobile wine buying on m-commerce website loyalty. The three
most commonly used measures of emotions are: pleasure, arousal and dominance (PAD)
(Sørensen, 2008; Koufaris, 2002), which are normally related to the environmental stimuli
component in m-commerce (Kaikkonen, 2012). We have drawn on Mehrabian and Russell’s
(1974) PAD theory to substantiate our moderated mediated model of wine purchase via
mobile phones and websites and to develop our hypotheses.
Figure 1: Research Model
X
= Feelings towards buying wine on mobile phone
Y
= Mobile website loyalty
Mi
= Sales Promotion
W
= Service (wine delivery) attributes of the website
Based on the theoretical model and suggestions from relevant literature we state that:
H1: Sales promotional efforts do not mediate the relationship between feelings towards
buying wine via mobile phone and m-commerce website loyalty
H2: Online service (wine delivery) attributes of the website do not moderate the strength of
the mediated relationship between feelings towards buying wine on mobile phones and mcommerce websites via marketing and promotional efforts.
3.
RESEARCH METHOD
3.1.
Sample and Data collection
This research involved 2,754 respondents from six countries (France, Germany, Greece,
South Africa, United States and Canada). Data was collected using both personal and online
questionnaires. Non-probability, criterion-based purposive sampling was used because it
allowed the researchers to intentionally select participants who have experience with the
central phenomenon being explored (Hair et al. 2009). In this study the central phenomenon
under investigation si experience with wine websites. The sample was initially screened for
legal drinking age and ownership of a smartphone for online access. The recruitment criteria
included whether participants were members of a wine club or liked a fan page dedicated to
wine. The sample included a large number of students as they are active Internet and mobile
users, comprising 42.7% of total participants.
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3.2.
Survey Instrument
To measure the feelings with regards to buying wine using a mobile phone, we adapted
Mehrabian and Russell’s (1974) PAD scale. Participants responded to items assessing their
feelings, using bi-polar items with anchors including harmful/beneficial, unpleasant/ pleasant,
bad/ good, worthless/valuable, and unenjoyable/enjoyable on a five-point semantic
differential scale, where 1 represented “negative feelings” and 5 “positive feelings”. We used
the PAD scale due to its continual high reliability (Valdez & Mehrabian, 1994).
Researches have indicated different intentions to revisit the website. The first one is how
usability defines the promptness of how the system could be used (Davis, 1989), and how
user friendly, easily navigated and organized it is (Parasuraman et al., 2005). In our
conceptualisation, m-commerce website loyalty is the extent to which an m-commerce
website provides the required information, perceived usefulness, ease of use and the extent to
which a visitor has the behavioral tendency to regularly visit it. This construct is measured
with four items using a 5-point Likert type scale, where 1 refers to “strongly disagree” and 5
to “strongly agree”. The construct contains items: I know which website I should visit to get
the information I need; I am loyal to a particular website; I can find my favourite website
address without much effort; I can immediately recognise my favorite website address if it is
presented among other addresses.
The service attributes of an m-commerce website are defined as the extent to which such
attributes encourage buying wine on a mobile phone. We asked respondents to rate items on a
Likert-type scale where 1 denotes “very unimportant” and 5 denotes “very important”. The
construct is measured with four items: on-time delivery; quality of the wine; tracking your
online purchase and low delivery charges. The assumption is that on-time delivery and
quality of wine influences consumers’ feelings towards buying wine via mobile phones and
enhances m-commerce website loyalty. The assumption is that quality of wine and on-time
delivery influence website revisits while being able to track orders online assures consumers
and builds confidence in the transaction exchange. Yoon (2002) found that both trust and
satisfaction positively influenced website revisits. We asked participants to rate the
importance of online sales promotion when buying wine through mobile phones, measured
on a 5-point scale where 1 denotes “unimportant” and 5 denotes “important”.
To examine the mediating role of sales promotion in the relationship between consumers’
feelings toward buying wine on mobile phones and m-commerce website loyalty, we propose
that sales promotion efforts do not mediate the relationship between positive feelings towards
buying wine on mobile and loyalty to a m-commerce website. The assumption is that online
service (wine delivery) attributes of the website do not moderate the strength of the mediated
relationship between positive feelings towards buying wine on mobile phone and mcommerce websites loyalty via marketing and promotional efforts
In our study, m-commerce website loyalty is a major dependent variable. The independent
variable consisted of consumer feelings toward buying wine using mobile phones. Service
(wine delivery) attributes and sales promotional efforts entered the model as mediating and
moderating variables respectively. We deemed it necessary to control for wine expertise and
drinking habits on the hypothesised relationship (moderated mediation).
256 | P a g e
3.3.
Scale Validation
Using Preacher et al.’s (2007) procedure, we report a moderated mediation test of our model
that used survey data collected from 2754 responses from six countries. The most commonly
used test for internal consistency is Cronbach’s alpha (Cronbach, 1951) and values for the
independent and mediating and moderating factors ranged between .69 and .89. Rossiter
(2002) suggests the importance of expert judgement for the face validity of the research
instrument. Accordingly, twelve experts from marketing and information science fields
critically evaluated all the items in the research instrument to assess content validity,
representativeness, dimensionality, comprehensibility and unambiguity.
To analyse unidimensionality, exploratory factor analysis (EFA) was employed using SPSS,
version 20. This was followed by confirmatory factor analyses (CFA) for validation of the
measurement model. All of the fit indices (RMR = 0.03, GFI = .99, AGFI = .98, NFI = .98,
TLI = .98, CFI = .99 RMSEA = 0.03) were in the acceptable range as suggested by Bentler
(1992). In addition, we found all the individual factor loadings to be highly significant, giving
support for convergent validity (Gerbing & Anderson, 1988). We calculated the Cronbach
alpha coefficient, composite factor reliability, and average variance extracted for each of the
scales and the values were in the desirable range except for online service (wine delivery)
attributes, which fell below the cut-off criteria. We made the decision to retain service (wine
delivery) attributes for mobile wine purchase in our analysis on theoretical grounds. We also
tested for alternate models and found the original models to be better than all the constrained
models. Table 1 shows that our measures have the required construct validity.
Table 2: Results of construct validity
CR
AVE
MSV
ASV
SMOB
FMOB MKT
SMOB
0.70
0.35
0.17
0.10
0.59
FMOB
0.90
0.63
0.04
0.03
0.19
0.80
MKT
0.60
0.47
0.17
0.10
0.41
0.18
0.66
Note: *Factor correlations and discriminant validity (square root of average variance extracted displayed on the diagonal).
SMOB
= Service attributes for buying wine on mobile phone
FMOB
= Feelings towards buying wine on mobile phone
MKT
= Marketing efforts
CR
= Composite Reliability
AVE
= Average Variance Extracted
MSV
= Maximum Shared Variance
ASV
= Average Shared Variance
257 | P a g e
4.
RESULTS AND DISCUSSION
We used hierarchical multiple regressions to test Hypothesis 1 and hierarchical moderated
regression to test Hypothesis 2. In all analyses we entered the control variables of wine
expertise and drinking habit. All variance-inflation factors in our regression were below 2;
and none of the bivariate correlations had high coefficients, suggesting that multicollinearity
is not an issue in our analysis.
After controlling for wine expertise and drinking habits, we found that feelings towards
buying wine on mobile and online sales promotion were positively related (β = .17, p<.001)
and feelings towards buying wine on mobile and website loyalty were significant (β = .03,
p<.05). The mediating factor online sales promotion and website loyalty were negatively
related (β = -.06, p<.001). The results show that the direct effect of feelings towards buying
wine on mobile phone and loyalty towards m-commerce website in the presence of online
sales promotion was not significant (β = -.03, S.E = .01, p >.05).
Positive feelings toward buying wine on mobile phones and m-commerce websites are
mediated via online sales promotion (H1). This relationship is stronger indirectly (FMOB) -> online sales promotion (PROM) --> m-commerce website loyalty (LOY) (β = -.01, S.E. =
.03, Boot LLCI = -.02, Boot ULCI = -.01). Absence of zero between Boot LLCI (Boot Lower
Level Confidence Interval) and Boot ULCI (Boot Upper Level Confidence Interval) supports
our hypothesis (H1). We followed Preacher et al. (2007) to establish moderation when testing
Hypothesis 2. After controlling for wine expertise and drinking habits, feelings toward
buying wine on mobile phones and website loyalty were significant and positively related (β
= .03, S.E = .01, p<.05) and the mediating factor online sales promotion and website loyalty
was negatively related (β = -.06, S.E. .01, p <.001). The moderating variable online service
(wine delivery) attributes and website loyalty were significant and positively related (β = .15,
S.E = .02, p <.001). The interaction term for feelings towards buying wine on mobile phone
with online service (wine delivery) attributes (β = .09, S.E = .02, p <.001) were significant in
predicting website loyalty.
Moderated mediation was assessed following Preacher et al. (2007) to determine whether the
strength of the mediation differs across the levels of the moderator in predicting the effect of
feelings towards buying wine on mobile phones and website loyalty. Moderated mediation is
demonstrated when the conditional direct effect of feelings towards buying wine on mobile
phones and on website loyalty via sales promotion differs in strength across the values of the
moderator (wine delivery service attributes). We operationalized high and low levels of
online service attributes as one standard deviation above and below the mean score. Table 2
presents the estimates, standard errors, and significance value of the conditional direct effect
of independent on dependent variable at values of the moderator.
258 | P a g e
Table 2: Moderated mediation result for sales promotion and online (wine delivery) service
Moderator
Level
Conditional
direct effect
SE
Sig
LLCI
ULCI
Online service
(wine delivery)
attributes
-.84
-.05
.02
.03
-.09
-.01
.00
.03
.02
.05
.00
.06
.84
.11
.02
.00
.07
.15
Results show that online service (wine delivery) attributes moderated the mediation of
online sales promotion between the positive feelings towards buying wine on mobile phone
and m-commerce websites loyalty (H2)
Additional observations


7.
The effect of feelings towards buying wine on mobile phones and m-commerce
website loyalty is stronger when buyers receive higher levels of service from mcommerce websites (See Table 1).
Results show that for online service (wine delivery) attributes, the conditional direct
effects were at higher values of the moderator (β = .11, S.E = .02, p <.001) than at the
mean score (β = .03, S.E = .02, p=.05). Taken together, results verify our observation
that there was a moderated mediation.
CONCLUSIONS
This paper examines a) the mediating role of sales promotion in the relationship between
feelings towards buying wine through mobile phones and m-commerce websites and b) the
moderating role of service attributes of m-commerce websites in influencing the mediation.
We did not found support for null hypothesis and accepted alternative hypothesis. That is,
sales promotional efforts mediate the relationship between positive feelings towards buying
wine via mobile phone and m-commerce website loyalty. The online service (wine delivery)
attributes of the website moderate the strength of the mediated relationship between positive
feelings towards buying wine on mobile phone and m-commerce websites loyalty via
marketing and promotional efforts. Our additional finding sheds further light into these
relationships, for example, positive feelings towards mobile wine buying and loyalty towards
m-commerce websites are related with higher levels of online sales promotion. Results show
that for online service (wine delivery) attributes, the conditional direct effects were at higher
values of the moderator than at the mean score. Taken together, results verify our observation
that there was a moderated mediation (See Table 2). This suggests that mobile wine
purchasing is effective when wine sellers include sales promotion on their m-commerce
websites and that service attributes seem to moderate the likelihood of repeat purchase. The
growing use of radio technology systems such as Beacon should provide wine sellers with
“push marketing” techniques in order to make customers aware of the availability of their
259 | P a g e
wine in the local area. Push marketing, including mobile email, SMS, in-app and other push
notifications, has the potential to reach customers with messages whenever and wherever
they are, enabling further growth of m-commerce (Pelet, 2013). Location-based or timesensitive offers coupled with opt-in alerts can be a winning combination to boost conversion
and engagement (Pelet, 2014), especially at the happy-hour time.
Despite the development of new technologies that may make the mobile experience even
more convenient, wine delivery and associated services such as storing the wine in a proper
place with the right temperature, hygrometry and luminosity conditions, because wine like it
cool, dark and moist, can become of paramount for customers. These professional cellar
conditions proposed by websites should be the priority for the wine marketer's strategy
devoting his energy for m-commerce purposes. Traditional distribution, supply-chain
management and its optimization should still be priorities for wine competitors, whether they
are e-retailers, m-retailers, or even traditional retailers.
Our research was encompassed six countries and as a result, our findings are limited to these
counters. Future research could include other countries with growing wine consumption such
as China and Russia. Further, this examination was restricted to understanding feelings
towards mobile wine buying and mobile website loyalty. Future research is recommended to
examine attitudes towards wine purchasing behaviours, such as between m-wine purchasers
vs. non-purchasers and different age groups.
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262 | P a g e
Coffee and Wine: A Comparison of Two Value Chains, Ownership
Structures and Sustainability Standards
Morten Scholer
Coppet, Switzerland
[email protected]
Abstract:
Purpose: The coffee sector looks up to the wine sector – for several good reasons: Wine has
a long and fascinating history, wine is full of prestige and mystery with terms like terroir and
bouquet, and the prices of wine are (sometimes) high. So in the coffee sector you regularly
hear the question: Why don’t we do as they do in the wine sector?
An analysis of the two sectors is ongoing for clarification of the many similarities and
differences between the two sectors – partly to respond to the question raised above.
Methodology: The two products and the two value chains are analysed for comparison – from
tree and vine to cup and glass. Desk research is supplemented with visits to organizations,
research institutions, conferences, growers, producers, companies and individuals in both
sectors in producing and consuming countries.
Findings: More than 60 differences between the two products as well as the two sectors have
been identified till now. Four structural differences between the two sectors are highlighted in
this paper.
Practical implications: The findings will be used for a book with a detailed juxtaposition of
the two sectors. The book is scheduled to be published in 2017.
Keywords: Coffee, wine, comparison, value chains, dominating companies, sustainability.
263 | P a g e
1. BACKGROUND
The coffee sector looks up to the wine sector for several reasons. Wine has a long and
fascinating history, it is full of prestige and sometimes hype, and some wines are sold at
astronomic prices. But the coffee sector cannot directly copy the wine sector as many aspects
in the two sectors are fundamentally different.
This paper describes four differences between the coffee sector and the wine sector. The data
is taken from a larger gross material compiled for several years by the author.
The initial aim with the material was to advise the coffee sector on how it can possibly
benefit from imitating the wine sector. Indications are currently that both sectors can learn
from each other. A book on the topic is scheduled to be published in 2017 and may be the
first of its kind.
2. FOUR DIFFERENCES BETWEEN THE COFFEE SECTOR AND THE WINE
SECTOR
2.1. Structure of the value chains
The most significant difference between the coffee sector and the wine sector is probably the
number of stages in the value chain. The value chain is long for coffee – with many physical
transformations and shifts of ownership – whereas it is short for wine with only few
transformations and usually with all of them at the same location. Wine is one of the very few
products still produced from A to Z in the same place.
The wine producer usually (i) grows the grapes, or knows the grower and where the grapes
come from, (ii) tastes, evaluates and adapts the product during processing, (iii) puts up the
final product for sale, and (iv) often also knows at least some of his or her buyers and gets
their feedback. The wine producer thereby gets to know the final product (wine) very well.
The coffee grower typically (i) sells coffee cherries or green coffee beans to a domestic trader
who (ii) supplies an exporter who processes the coffee and then (iii) sells it to a trading house
that (iv) supplies roasters who (v) sell the final product (roasted coffee) to retailers where (vi)
the end consumer buys it, and eventually (vii) becomes the coffee brewer – unless the coffee
is purchased in a café or restaurant. Many coffee growers have never tasted or even seen a
cup of coffee.
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Table 1. Key stages in the typical value chain for coffee and for wine
Coffee
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Field work
Harvest
In-land trading
Primary processing (dry or wet)
In-land trading
Milling
Sorting
Stuffing (bags or bulk)
Sale from exporter
……………. Border ……………
Shipping
Storage
In-land transportation
Blending
Roasting
Packing
Sale to professionals, retail and
end-consumer
Grinding
Brewing (professional or at home)
Serving – drinking
Wine
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Field work
Harvest
De-stemming and crunching
Maceration
Fermentation
Storage (aging)
Blending
Bottling
Sale from producer
……….… Border …………...
Shipping
Storage
In-land transportation
Sale to professionals, retail and
end-consumer
Serving – drinking
……………………………………………..
The main physical transformations are
underscored.
2.2 Quality enhancement options
The quality of wine can be enhanced in many ways by chemical and physical methods.
Enthusiasts of ‘natural-wine’ tend to call these methods manipulation. Some of the methods
are known for centuries – others are developed in the last few decades. Table 2 has a list of
some of the most frequently used methods.
Table 2. Chemical and physical methods for enhancement of the quality of wine
- Flash détente – heating of grapes to 85 °C (185 °F) followed by vacuum exposure for
aroma and tannin extraction from the grape skin;
- Concentration – reverse osmosis, evaporation and icing (cryogenic);
- Industrial yeasts – a huge choice for different functions and styles;
- Chaptalization – adding sugar for increase of the alcohol content;
- Acidification – adding acids for adjustment of aroma and flavour;
- Fining – using additives for clarification of an otherwise hazy wine;
- Cone-spinning – a vacuum exposure at 35 °C (95 °F) for adjustment of alcohol and
aromas; and
- Oak-flavouring – using barrels, staves and chips for adjustment of aromas and flavours.
265 | P a g e
Only a few quality improvements of this kind are possible for coffee. Among the few
methods are steam-cleaning of green (raw) Robusta beans and preservation of some aromas
in the production of soluble (instant) coffee. Otherwise focus is on preserving the intrinsic
high quality and avoiding deteriorations at all stages in the value chain.
The quality can drop in many ways on coffee’s long journey from tree to cup, for example
because of moisture and fungus if the coffee is stored at a wrong temperature or humidity.
And once the quality has dropped it is next to impossible to correct the mishap. One remedy
is to roast the beans harder as it is sometimes done for coffees (also good quality coffees)
taken with milk and other additives (caffè latte, cappuccino, etc.). But dark roasting is not a
genuine quality improvement but sometimes done to ‘cover’ a mediocre quality.
2.3 Large companies in the two sectors
Ownerships in the world of coffee trading houses, roasters and brands have changed regularly
for many years – not least since 2000. The overall trend is towards ‘getting big’ – as in other
sectors like banks, airlines, breweries and the pharmaceutical industry.
Among coffee trading houses (importers of green beans – also offering processing, storage,
just-in-time delivery and financing) the largest groups have more than 10% of the world
market. The eight largest groups have 50% of the world market. At the level of roasters
(offering branded products to retailers) the two largest groups have over 10% of the world
market and the eight largest groups combined have 40%. Most of the leading coffee trading
houses and roasters are European as reflected in Table 3.
The wine sector is different. The leading companies in the industry may be big but even the
largest of them account for less than 3% of the global production of wine. The ten largest
companies combined account for 13% only. Only two of them are European – both French.
The large wine companies are generally not known by the end-consumer whereas many of
their brands are well known – some of them worldwide. Details on the companies and some
of their brands are given in Table 4 and Table 5.
The wine industry in the US is dominated by a few large companies. Three of them – E&J
Gallo, Constellation Brands and The Wine Group – are the world’s biggest wine companies.
Combined they account for more than half of all wine traded in the US.
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Table 3. Large companies in the coffee sector
Function
World
Company
Nationality
market
Portion
11%
Neumann – NKG
Germany
Trading
10%
ECOM (incl. Armajaro)
Switzerland
houses
7%
OLAM
Singapore-UK
7%
EDF Man – Volcafe
UK-Switzerland
6%
LouisDreyfus
France-CH-NL
4%
Noble
HK-Singapore
3%
Sucafina
Switzerland
2%
COEX
USA
13%
Jacobs Douwe Egberts
NL-Germany
Roasters
11%
Nestlé (Nescafé, Nespresso, …)
Switzerland
(brands)
5%
Smucker’s (Folgers, Milhouse, …)
USA
3%
Elite-Strauss
Israel-USA
3%
Tchibo
Germany
2%
Starbucks
USA
2%
Lavazza
Italy
1.5%
Keurig Green Mountain
USA
1.5%
Melitta
Germany
1.5%
Segafredo-Zanetti
Italy
1.5%
Aldi
Germany
1.0%
Kraft (Maxwell House, …)
USA
1.0%
UCC
Japan
Source: ITC/UN’s The Coffee Exporter’s Guide with the author’s updates from company
homepages and interviews.
Table 4. Large companies in the wine sector
World market
Company
Nationality
portion
2.7%
Gallo Winery
USA
2.1%
Constellation
USA
1.6%
The Wine Group
USA
1.0%
Treasury Wine Group
Australia
1.0%
Penaflor (Trapiche)
Argentina
1.0%
Concha y Toro
Chile
1.0%
Castel
France
1.0%
Accolade
Australia
0.9%
Pernod Ricard
France
0.7%
Bronco Wine
USA
Source: Author’s calculations based primarily on information from the companies’
homepages. The data is cross checked through articles and interviews.
267 | P a g e
Table 5. The world’s ten best selling wine brands
Ran
k
Brand
1
2
3
4
Barefoot
Gallo
Concha y Toro
Robert
Mondavi
Sutter Home
5
Owner
E&J Gallo Winery, USA
E&J Gallo Winery, USA
Concha y Toro, Chile
Constellation Brands, USA
Wine origin
California, USA
California, USA
Chile
California, USA
Million
bottles
2014
216
174
170
145
Trinchero Family Estates,
California, USA
USA
6
Yellow Tail
Casella Wines, Australia
Australia
7
Hardys
Accolades Wine, Australia
Australia
8
Lindeman’s
Treasury Wine Estates,
California, USA
Australia
9
Beringer
Treasury Wine Estates,
California, USA
Australia
10 Jacob’s Creek Pernod Ricard, France
Australia
Source: The Drinks Business, May 2015 (with permission).
130
126
113
97
86
72
The world production is 270 million hectolitres annually; Barefoot makes up close to 0.6%
of the world production and 5% of the market in the US (30 million hectolitres or 4 billion
bottles).
China’s largest brands include Great Wall (in the French group Pernod Ricard), Dynasty
and Changyu. They are not ranked here as data is insufficient.
2.4 Sustainability standards
Sustainability standards have become à-la-mode in both coffee and wine in the last two
decades for various reasons: good for the environment (soil, water, climate, CO2 emission,
flora and fauna), good for the workers (health, remuneration and work conditions in general),
good for the consumer (health – and taste, maybe), good for transparency and traceability,
and generally good for the image of all parties involved, including the end-consumer.
Sustainability standards are more complex for coffee than for wine for several reasons. That
goes for development of the standards, implementation (training and introduction of new
practices), certification and monitoring of compliance.
Note: ‘More complex for coffee than for wine’ is not the same as ‘easy for wine’!
Here are four reasons why sustainability standards are more complex for coffee than for
wine:
2.4.1 Coffee standards are global
The leading sustainability standards for coffee operate worldwide and the conditions for all
partners in a standard are the same – apart from minor deviations under very special
circumstances. The most prominent standards (also called schemes or programmes) are
Organic, Fairtrade, Rainforest Alliance, UTZ Certified and 4C, which cover one or three
268 | P a g e
sustainability dimensions as shown in Table 6 below. Most of the leading standards are
practiced in more than half of the over 60 coffee producing countries.
Table 6. Leading sustainability standards for coffee
Dimension
Environmental
Social
Economic
Standards with a
‘main dimension’
Organic
Biodynamic
Shade-grown
Bird-friendly
Fairtrade (FLO)
Fair Trade USA
-
Standards covering
‘all dimensions’
- Rainforest Alliance
- UTZ Certified
- 4C (Common Code for
the Coffee Community)
- Nespresso AAA
- Starbucks‘ C.A.F.E.
Practices
- Keurig Green Mountain’s
Responsible Sourcing
Four notes on Table 6:




The overview of sustainability standards for coffee is somewhat simplistic but for
comparison at a glance it can be useful.
The sale of coffee under each of the leading sustainability schemes (Organic,
Fairtrade, RA, UTZ, 4C, Nespresso-AAA, Starbucks-C.A.F.E. and KGM-RS) is
around 1-2% of the world’s coffee. Some coffees are double-certified, for example
Organic and Fairtrade. The total sale of coffee under the mentioned schemes is in the
magnitude of 10% of the world’s coffee.
4C is an entry-level business-to-business standard with no logo on the retail packs.
The in-house schemes set up by the leading brands (Nespresso, Starbucks and KGM)
are certified by third parties. They are comparable with RA and UTZ, and also include
criteria for the cup quality of the coffee.
Sustainability standards in wine are different. They are developed for one country or one
region only – and are usually developed by people in that country and adapted to conditions
in that country or region. The standards for wine have primarily covered environmental
issues, including carbon emissions. Social and economic criteria have been somewhat
ignored although that is changing. Nationwide programmes for wine are set up in, for
example, Austria, South Africa, Australia and New Zealand. Among the many regional
programmes are California, which again has sub-regional programmes, for example in the
county of Sonoma.
269 | P a g e
2.4.2. A long value chain with many participants
The value chain in coffee is longer and more complex than in wine. As all parties have to be
part in and comply with the standard it means (i) many producers involved (sometimes
thousands of smallholders), (ii) many stages of physical transformations to be adapted for
compliance and later on monitored, (iii) many partners who do not know each other (each of
them individually handling the coffee in the long value chain), and (iv) partners in the chain
are far from each other – sometimes 10,000 km or more.
2.4.3. Geographical spread
There are more than 60 coffee producing countries. Most coffee ends up in blends based on
two or five or more coffees from around the world. Each of these coffees has to comply with
the sustainability standard used which adds to the logistic complexity. Wine may also be a
blend but the grapes usually come from the same estate or at least the same region. This
component of the complexity has made Rainforest Alliance sometimes indicate that (as an
example) ‘40% or more of this coffee is RA certified’, which may refer to one out of three
coffees in a blend.
2.4.4. Participants’ education
Around 80% of the world’s coffee is produced by smallholder growers in Honduras, Rwanda,
Indonesia and more than 50 other developing countries. Participants in sustainability
programmes in coffee producing countries are usually not as well educated and informed as
the grape growers, the wine producers and other parties in the wine business.
3. SUMMARY
More than 60 differences between coffee and wine (as products and as sectors) have been
identified and described till now. Four of the most significant differences are listed in Table 7.
Table 7. Four significant differences between the coffee sector and the wine sector
Basis for comparison
Number of stages in the value chain
(physical transformations and shifts of
ownership)
Options for quality enhancement during
transformation and processing
Leading companies’ share of the world
market
Complexity of sustainability standards
Difference
Coffee: Many stages in different places;
Wine: Fewer stages – usually in one place
Coffee: Very few options only;
Wine: Many options – both chemical and
physical
Coffee: Some companies have over 10%;
Wine: All companies have below 3%
(but may still be very large)
Coffee: Fairly complex – and global;
Wine: Easier than coffee – which is not the
same as easy!
A book describing and comparing the two products and two sectors in detail is scheduled for
publication in 2017. It may be the first book of its kind.
270 | P a g e
ANNEXURE:
COFFEE AND WINE - KEY DATA ON PRODUCTION, TRADE AND CONSUMPTION
Coffee production and trade
- The world production of coffee is 150 million 60-kg bags (9 million tonnes) of green coffee
beans per year. It takes almost 500,000 containers (20 ft.) to carry that much coffee. Placed in
a row they would stretch over 3,000 km (1,800 miles).
- Coffee is produced in more than 60 countries of which two account for more than half of the
world’s production: Brazil 36% and Vietnam 16%.
- African countries combined produce around 12% (only).
- Arabica coffee, the fine-flavoured aromatic type, makes up around 60% of the total
production and usually fetches the highest prices. The other variety, Robusta, is easier to
produce and is more resistant to disease. It is often used as a filler in blends.
- Around 70% of all coffee is exported – most of it in the form of green beans.
Coffee consumption
- The Nordic countries consume almost 10 kg coffee (green bean equivalent) per capita
annually. Most other European countries consume around 6 kg with UK and some Eastern
European countries at around 3 kg only.
- The consumption is very low in most coffee producing countries apart from Brazil where it
is 6 kg. That is higher than in the United States where it is 5 kg per capita.
- Tea-drinking China and India consume on average only around 100 grams per capita.
- Leading brands like Starbucks, Nespresso and Keurig Green Mountain each account for
around 2% of the world’s coffee by volume.
Wine production and trade
- The world production of wine has been stable at around 270 million hL annually since
2000.
- Three countries (France, Italy and Spain) produce
half of the world’s wine.
- Just over 40% of the world’s wine is traded
internationally (exported/imported).
- Around 50% of the wine exported from the
Southern Hemisphere (mainly Chile, Argentina, South Africa, Australia and New Zealand) is
sent in bulk containers and bottled or otherwise packed for retail when it reaches Europe,
North America or other destinations.
Wine consumption
- Europe consumes around 60% of the world’s wine. In 2000 it was 70%.
- Consumption per capita in France, Italy and Portugal is around 40 litres per year. It was
above 100 litres in 1960.
- Consumption per capita in the UK, Germany, The Netherlands and the Nordic countries is
20-30 litres per year– up from around 3 litres only in 1960 (12 litres for Germany).
- Consumption per capita in the US is on average 12 litres per year – up from 3 litres in 1960.
271 | P a g e
Factors impacting wine prices’ mark-up in restaurants
Florine Livat
KEDGE Business School; Bordeaux Wine Economics, France
[email protected]
Hervé Remaud
[email protected]
Abstract:
Purpose: of the study is to analyse the determinants of wine price mark-up in restaurants. Wine
sold at the restaurants is a substantial contributor of the restaurants’ profitability and better
understanding factors impacting mark-up is critical for the industry.
Methodology: Sommeliers around the world, mostly members of the International Sommeliers
Association (ASI), have been approached to complete an internet based questionnaire, from
February to May 2014. Of the 800 who started the survey, 267 fully completed the
questionnaire, generating 1869 observations. We regress the declared mark-up against
restaurant’s and wine list characteristics, including managerial practices, and wine steward
characteristics.
Findings: suggest to adopt a more holistic perspective on mark-up decision, based on various
criterion including: the long experience of the sommeliers, the ability to ‘capture’ clients of
the hotel attached to the restaurant, and a fine dining positioning.
Practical Implications: If the restaurants apply a simple rule of thumb to set wine prices,
when focusing on every price segment, it appears that sommeliers doesn’t matter that much.
The restaurant positioning and style is more likely to explain a positive impact on wine
prices’ mark-up.
Keywords: Mark-up, wine, restaurant, sommelier
272 | P a g e
1. INTRODUCTION
Most sommeliers, if not all, have a good understanding and knowledge of the wines they
sell. But designing and managing the wine list is a different job, requiring a different set of
expertise. As such, the sommelier’s managerial behavior seems critical in the success of a
wine list and can be a substantial contributor of the restaurants’ profitability. Part of the
profitability of the wine list relates to the mark-up that is applied to the wines available on
the list. A mark-up is the amount the restauranteur will charge in addition to the cost of
purchase of the wine. The purpose of this study is to analyse empirically the determinants of
wine price mark-up size in the case of restaurants and respond to the following question: what
are the determinants of wine price markup size?
Thanks to an original survey conducted in 2014 with sommeliers, we regress the declared
mark-up against restaurants characteristics, wine list characteristics and wine steward
characteristics. Following a few words about mark-up determinants and the research
protocol, we present the findings of the survey and its main managerial implications.
2. LITERATURE OVERVIEW
2.1. Wine lists and wine sales
Wine list is conceived as a way to differentiate restaurants (Berenguer et al., 2009; Gil et al.,
2008) and as a merchandising tool (Yang and Lynn, 2009). Yang and Lynn (2009) show that
some wine list characteristics, for example adding wines on the food menu, can increase
wine sales, while a categorization of wines according to their style is associated with lower
wine sales. In a restaurant revenue management approach (Thompson, 2010), wine is a
relevant item to manage restaurant profitability. The wine list can contribute to restaurant
performance and success through perceived quality, customer loyalty, customer satisfaction,
etc. (see Sirieix et al., 2011 for a review).
2.2. Wine lists and wine steward
According to the OIV (2014), a wine steward or sommelier is “a professional from the
vitivinicultural and catering sectors, wineries or other distributors that recommend and serve
beverages at a professional level”. Their field of activity is “the service of wine in the
catering industry or in establishments selling wine, as well as the provision of specialized
advice for those involved in the wine market to ensure good presentation and service of
products”. A "sommelier effect" has been documented in the empirical literature, especially
on wine sales (Manske and Cordua, 2005): the sommelier education and training allows to
develop employees training and to increase sales as well as to improve salesperson
credibility who are perceived as trustworthy and competent. Ben Dewald (2008) addresses
the advantages of employing a sommelier in fine dining restaurants and show that he allows
to identify best product available to meet restaurant customers' expectations and to update
the wine list more frequently than without any designated sommelier.
273 | P a g e
2.3 Markup size determinants
Differentiation allows firm to charge a markup, which is added to the marginal cost of
production under monopolistic competition. As such, the markup size measure the
competitive pressure (Ponikvar and Tajnikar, 2012). The mark-up size determinants are
numerous. There are some firm-specific factors, connected with market power and firm’s
strategies (Schmalensee, 1989 ; Martin, 2001), some industry-specific factors (Sutton, 2001)
like concentration, entry barriers, product differentiation, technology in the industry, demand
dynamics, and some environmental and institutional factors (Dunn, 2002) such as antitrust
policy, the role of unions, the economic trends (Motta, 2004). Usually, restaurants apply a
proportionally smaller mark-up to higher priced wines (Amspacher, 2011) and the potential
wine margin determine the buying decisions made by the restaurateur (Preszler and Schmidt,
2009).
If the cost of the wine and its expected selling price are key determinants of the mark-up
decision, some other aspects investigated here may explain it. On one hand, the way the
wine list is designed can improve the restaurant’s performance. Most of the literature related
to this subject focuses on this relationship. On the other hand, the sommelier’s profile, skills
and knowledge can generate positive effects on restaurant’s wine sales. In this paper, we
integrate these firm-specific elements, including the sommelier profile and the way the wine
list is managed (purchase, update, etc.), to identify the determinants of wine-price mark-up
size within a single industry context.
3.1. Data collection and sample
A survey with sommeliers was conducted online worldwide in February - May 2014. To
recruit the participants, an invitation to participate was sent to all ASI (Sommeliers
International Association) presidents. They in turn forwarded the invitation to all their
members. Of the 800 who started the survey, 267 fully completed the questionnaire,
generating 1869 observations (267 restaurants * 7 price segments → 1869 observations).
The mark-up definition was presented first to all respondents: “If you buy a bottle of wine
5€ (or $5, RMB50, etc) and sell it 15€, it means that your mark-up equals 10€ (15-5=10). In
percentage, it equals 200% ([10/5]*100=200%)”; followed with the question: “What is the
average mark-up (in %) that you apply for the wines (per bottle) available on your wines
list/menu?”.
As discussed by Amspacher (2011), we also found a negative correlation between the
declared mark-up and the cost of wine bought (Figure 1).
274 | P a g e
Figure 1: Average mark-up (in %) per cost of wines bought (in euro)
Other characteristics than price segments include:



Restaurants characteristics: location, size (number of seats), style, ownership, associated
with a hotel, wine storage area, average cost of a meal (used as a proxy for the number
of waiters), % of wine sales in the whole restaurant turnover.
Wine list characteristics, design and management: person in charge of the wine list
design, number of different wines, frequency of update, number of wines by the glass,
suppliers’ profile, buying en primeur wines (futures).
Sommelier characteristics: gender, years of experience (proxy for age), qualification
(certifications), other occupation in the restaurant.
More than 35 countries are represented in the survey and nearly half of the sommeliers who
responded are located in Europe. About a quarter are located in Asia and 20% in South
America.
3.2. Statistical approach
Our study being conducted within a given industry, we focus on firm-specific factors. We
propose to estimate two different mark-up equations:
1. We regress the mark-up against a series of dummies for every price segment (1 if the
wine has been purchased by the restaurant in the given price segment, 0 otherwise).
We use pooled data and include some restaurants individual effect.
2. For every price segment, we estimate an equation where the markup size (Mi) is a
function of restaurant’s characteristics (Ri), wine list characteristics and design,
including managerial practices (Li), and wine stewart characteristics (Si):
275 | P a g e
with α a constant term, β, γ, and δ parameters to be estimated, and ε an i.i.d. error term.
Indeed the wine price mark-up exhibit a significant dispersion within every segment and it
make sense to investigate the determinants of the mark-up size within each of these price
segment. As frequently written in wine columns, two different restaurants can sell the same
bottles at dramatically different prices: In New York City, “Silver Oak 2009 cabernet
sauvignon from Napa, a mere $200 on Tamarind Tribeca’s remarkably fair-priced list, costs
more elsewhere, up to $300 at Asiate in the Mandarin Oriental hotel” (Cuozzo, 2015).
4. RESULTS
The estimation results for every price segment are presented in the following table (Table 1).
The individual restaurant effects are not significant while the dummy variables associated
with every price range are very significant. It appears that the explanation of the mark-up
size is entirely captured by these dummies and that the estimated coefficient decreases when
the price paid by the restaurant to purchase the wine increases. As such, restaurants seem to
apply a simple rule of thumb depending on the price paid to purchase the wine, as shown
previously in the literature (Amspacher, 2011). It means that more mark-up determinants
could be found for each individual segment rather than from a global perspective.
Table 1: Mark-up size equation estimation results
Price range
Coef.
t-stat
Wine purchased less than 5 euros per bottle
87.4382***
20.01
Wine purchased between 6 and 10 euros per bottle
67.573***
15.46
56.7528***
12.99
47.4682***
10.86
26.5992***
6.09
13.4082***
3.07
Wine purchased more than 50 euros per bottle
Ref.
Intercept
111.8202***
Within R²
0.2750
Between R²
0.0100
Overall R²°
0.0726
36.19
° No unanimous agreement on which R² to report in a panel. Wooldridge (2010) suggest to
report the three measures.
*** significantly different from zero at 1%.
276 | P a g e
The detailed estimation results for every price segment are presented in the appendix 1. Very
few explanatory variables are significant:

Restaurants characteristics:
o Restaurants and sommeliers located in Asia tend to have a negative impact on
wines mark-up.
o Being a fine dining style of restaurant and associated with a hotel tend to
increase mark-up of wines.
o In line with the style of the restaurant, the average cost of a meal impact
positively mark-ups.
 Person in charge of the wine list:
o Food and beverage manager has a negative effect on mark-up size.
o The restaurant owner has a positive effect on mark-up size for the cheapest
wines.
 Sommeliers’ expertise and knowledge doesn’t matter that much, except sommeliers
with 10 years of experience or more, having a negative effect on the mark-up size for
most expensive wines.
5. DISCUSSION and CONCLUSIONS
What are the determinants of wine price markup size for restaurants? We focus on firm-specific
factors and, compared with the existing empirical literature, take into account the way the wine
list is managed, not only its design like in previous research, and the sommelier’s profile, as well
as some restaurants characteristics.
The most interesting and almost intriguing finding is the absence of relationship between the
sommelier’s characteristics (expertise, etc) and wines price mark-up. We could have
expected that sommeliers with a greater knowledge about wine (measured with a formal
degree) would have been able to select ‘original’ wines for which they could charge more
(greater mark-up). More than a degree, it seems that experienced sommelier know better
how to sell their more expensive wines with a lower mark-up. While this is a firm-specific
characteristic that depends on every restaurant’s strategy and can create differentiation,
regarding the mark-up size applied to wines by restaurants, sommelier doesn’t matter.
Wines price mark-up is positively related with the style of the restaurant: the more expensive
and fine dining the restaurant, the greater the mark-up applied to the wines price. This is
interesting as the style of the restaurant itself (its image, positioning, etc) allows
restauranteur to charge more on the cheapest wines (bought less than 20€). In the same vein,
and for all wine price segments, the greater the average cost of the meal, the greater the
mark-up applied to the wines price. In brief, most expensive restaurants attract clients with a
greater willingness to spend money for their meal, whatever the mark-up applied to the
wines. This in turn gives the opportunity to the restauranteur to apply greater mark-up to
their wines, including the cheapest one:
-
For wines bought less than 5€: mark-up of 162% for a casual restaurant vs. 237% for
a fine dining restaurant;
For wines bought between 6 and 10€: mark-up of 147% for a casual restaurant vs.
213% for a fine dining restaurant;
277 | P a g e
-
Being part of a hotel also gives the opportunity to generate greater mark-up, including for
the cheapest wine:
-
For wines bought less than 5€: mark-up of 184% for an independent restaurant vs.
225% for a restaurant part of a hotel;
For wines bought between 5 and 10€: mark-up of 164% for an independent
restaurant vs. 205% for a restaurant part of a hotel;
This may be explained by the fact that part of the clients going to the restaurant are also
clients of the hotel, ‘captive’ clients, and go for a meal by convenience at the hotel’s
restaurant: easy to access, to go to, etc; and so are less regarding about the price of the meal.
In Asia, having the opportunity to bring your own bottle at the restaurant (for a small fee),
and so a greater competition with entry level wines, may explain the negative impact of the
location (Asia vs. other countries) on wine prices’ mark-up.
More than the ability for the sommeliers to sell its wines at a greater mark-up, the fine
dining positioning of the restaurant is a greater influencer of the applied mark-up. But we
acknowledge the fact that more sommeliers characteristics should be added to better capture
their impact on wine prices’ mark-up, if any impact does exist. Our findings also suggest to
adopt a more holistic view on mark-up decision: understand clients willingness to pay for
wines and the positioning of the restaurant itself.
278 | P a g e
Appendix 1: Mark-up size equation estimation results per price segment
Wines purchased
Less than 5 €
6 to 10 €
11 to 15 €
16 to 20 €
21 to 30 €
31 to 50 €
More than 50 €
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
North America
-43.456
-1.09
-23.701
-0.74
-11.508
-0.40
-1.015
-0.04
-2.47
-0.10
3.976
0.17
.507
0.02
South America
-40.564
-1.60
-33.235
-1.54
-38.890**
-1.99
-32.209*
-1.69
-23.333
-1.41
-14.859
-0.93
-8.368
-0.51
-48.928**
-1.98
-52.387**
-2.50
-48.699**
-2.57
-36.228*
-1.96
-20.383
-1.27
-10.376
-0.67
-10.353
-0.65
Variables
Restaurant characteristics:
Asia
Europe
Ref.
Less than 60 seats
-.473
-0.02
.262697
0.01
-9.643
-0.56
-15.118
-0.91
-3.506
-0.24
-5.663
-0.40
1.304
0.09
From 60 to 100 seats
-10.727
-0.50
-4.239516
-0.23
-18.473
-1.12
-26.933*
-1.67
-12.360
-0.88
-7.312
-0.54
-5.740
-0.41
More than 100 seats
Ref.
Casual or bistro style
17.849
0.64
19.788
0.84
33.922
1.58
26.289
1.26
5.000
0.28
5.563
0.32
3.048
0.17
65.603**
2.42
60.268***
2.62
56.101***
2.70
43.485**
2.15
24.435
1.39
20.005
1.17
10.825
0.62
Fine dining style
Other style
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Chain
19.429
0.57
21.635
0.74
19.605
0.74
13.071
0.51
30.558
1.37
15.233
0.71
9.496
0.43
Franchise
-11.678
-0.18
-11.065
-0.20
-6.842
-0.14
-23.319
-0.48
4.799
0.11
-9.605
-0.24
-20.487
-0.49
Independent
7.359
0.28
13.521
0.61
19.985
1.00
17.382
0.90
16.367
0.97
11.623
0.71
9.047
0.54
Other kind of ownership
Ref.
Associated with a hotel
30.41
1.49
37.26**
2.14
42.443***
2.70
36.886**
2.41
21.881
1.64
25.432**
1.98
21.515
1.62
Cellar or temperature controlled
area to store wine
12.199
0.51
15.957
0.79
23.454
1.28
18.985
1.06
9.615
0.62
1.758
0.12
6.413
0.41
Average cost of a meal
.475***
2.73
.355**
2.41
.485***
0.000
.419***
3.23
.433***
3.82
.403***
3.68
.281**
2.50
-.734
-1.39
-.5196
-1.16
-.369
-0.91
-.237
-0.60
-.189
-0.55
-.095
-0.28
-.103
-0.30
% of wine sales
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Wines purchased
Less than 5 €
6 to 10 €
11 to 15 €
16 to 20 €
21 to 30 €
31 to 50 €
More than 50 €
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Number of different wines
-.004
-0.10
.005
0.16
-.003
-0.12
-.001
-0.03
.021
0.88
.016
0.70
.026
1.08
Number of wines offered by the
glass
.285
0.44
-.074
-0.14
-.362
-0.73
-.406
-0.83
-.311
-0.73
-.242
-0.59
-.413
-0.98
Monthly update
-13.804
-0.59
-19.849
-1.00
-19.719
-1.10
-22.219
-1.27
-15.708
-1.03
-5.812
-0.39
-6.112
-0.40
Every 3 months update
-20.626
-0.82
-19.81661
-0.93
-24.392
-1.27
-25.588
-1.36
-20.617
-1.26
-13.858
-0.88
-8.095
-0.50
Every 6 month update
3.349
0.14
-1.223
-0.06
-2.185
-0.12
-12.431
-0.70
-7.906
-0.51
-4.464
-0.30
-10.74
-0.69
Less frequent update
Ref.
Buy en primeur wines
-10.437
-0.53
-14.251
-0.85
-11.864
-0.78
-8.647
-0.58
-18.041
-1.40
-13.233
-1.06
-15.348
-1.20
-.233
-0.40
-.322
-0.74
-.121
-0.31
-.034
-0.09
-.044
-0.13
.191
0.59
.245
0.73
-.271
-0.43
-.248
-0.54
-.215
-0.52
-.216
-0.53
-.290
-0.83
-.276
-0.81
-.127
-0.36
Variables
Wine list characteristics:
% of wines purchased directly
from the wine estate
% of wines purchased from an
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
279 | P a g e
agent
% of wines purchased from a
merchant or distributor
.296
0.56
.344
0.93
.446
1.33
.348
1.06
.149
0.52
.143
0.52
.098
0.35
% of wines purchased from an
importer
-.001
-0.00
.026
0.07
.149
0.46
.238
0.76
.120
0.44
.135
0.51
.119
0.43
19.089
0.80
16.25
0.81
8.923
0.49
1.618
0.09
2.818
0.18
-6.35
-0.43
-19.392
-1.26
Food & beverage managers in
charge of wine list design
-41.823*
-1.74
-38.23*
-1.88
-39.278**
-2.13
-39.692**
-2.20
-41.783***
-2.66
-36.869**
-2.43
-28.315**
-1.81
Chef in charge of wine list
design
-53.783
-0.88
5.949
0.12
13.919
0.30
-23.618
-0.52
-21.200
-0.54
-44.670
-1.17
-57.352
-1.45
Owner in charge of wine list
design
49.059**
2.08
35.366*
1.76
23.017
1.27
10.059
0.57
5.073
0.33
9.056
0.61
3.927
0.26
Other person in charge of the
wine list
Ref.
Sommelier in charge of wine list
design
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Wines purchased
Less than 5 €
6 to 10 €
11 to 15 €
16 to 20 €
21 to 30 €
31 to 50 €
More than 50 €
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Est. Coef.
t-stat.
Gender (male=1)
28.372
1.17
16.741
0.82
12.293
0.67
12.674
0.70
-1.184
-0.08
4.166
0.28
7.982
0.51
More than 10 years of experience
as sommelier
-14.574
-0.79
-13.72
-0.87
-6.857
-0.48
-17.963
-1.29
-17.707
-1.46
-24.416**
-2.08
-26.145**
-2.16
Sommelier certification
-5.232
-0.27
-5.516
-0.33
-8.804
-0.59
-17.67
-1.16
-16.362
-1.23
-7.602
-0.59
-7.031
-0.53
WSET level, 1, 2 or 3
3.221
0.16
-1.210
-0.07
-1.578
-0.10
-3.5
-0.23
-.374
-0.03
.098
0.01
-4.782
-0.36
WSET level 4
23.067
0.79
17.163
0.69
20.237
0.90
13.168
0.60
20.077
1.05
21.556
1.17
13.773
0.73
Title at sommelier competition
-7.691
-0.36
-10.699
-0.59
-12.690
-0.77
-18.485
-1.14
-8.577
-0.61
-8.328
-0.61
-9.277
-0.66
Other qualification
1.922
0.08
9.280
0.47
6.847
0.38
.162
0.01
-3.344
-0.22
4.852
0.33
12.952
0.86
Only sommelier
2.692
0.10
-5.619
-0.25
-7.617
-0.38
-6.422
-0.33
-.292
-0.02
-2.709
-0.16
-4.509
-0.27
Also waiter
-9.594
-0.43
2.298
0.12
-6.836
-0.40
-4.990
-0.30
-5.368
-0.37
-18.054
-1.29
-7.783
-0.54
Also wine director
15.340
0.68
20.934
1.10
19.877
1.15
24.091
1.44
9.976
0.68
8.367
0.59
11.619
0.80
Also food & beverage manager
-6.961
-0.27
18.334
0.84
15.292
0.78
9.536
0.50
14.877
0.89
2.887
0.18
2.363
0.14
Also restaurant manager
4.531
0.21
6.018
0.33
1.031
0.06
-3.065
-0.19
-6.604
-0.48
-12.297
-0.92
-2.065
-0.15
Also other function
Ref.
Variables
Wine stewart characteristics:
Ref.
114.423*
Number of observations
R²
1.70
Ref.
99.025**
1.93
Ref.
79.199*
1.71
Ref.
110.133***
2.42
Ref.
115.925***
2.93
Ref.
102.93***
2.69
102.859***
267
267
267
267
267
267
267
0.2275
0.2438
0.2770
0.2461
0.2647
0.2365
0.1744
280 | P a g e
2.61
References
Amspacher, W. (2011). Wine price markup in California restaurants. Journal of Food
Distribution Research, 42(1), 4.
Ben Dewald, B. W. A. (2008). The role of the sommeliers and their influence on US
restaurant wine sales. International Journal of Wine Business Research, 20(2), 111-123.
Berenguer, G., Gil, I., & Ruiz, M. E. (2009). Do upscale restaurant owners use wine lists as
a differentiation strategy? International Journal of Hospitality Management, 28(1), 86-95.
Cuozzo, S. (2015). Restaurants overprice wine because they know you have no idea,
nypost.com, June 23, retrieved from http://nypost.com/2015/06/23/the-real-reason-yourwine-costs-so-much-at-restaurants/.
Dunn, Stephen P. (2002). A Post Keynesian Approach to the Theory of the Firm. In Post
Keynesian Econometrics, Microeconomics and the Theory of the Firm, ed. Sheila C. Dow
and John Hillard, 60-80. Cheltenham: Edward Elgar.
Gil Saura, I., Eugenia Ruiz Molina, M., & Berenguer Contrí, G. (2008). Qualitative and
quantitative engineering criteria of restaurant wine lists. Journal of Wine Research, 19(1),
19-31.
Manske, M., & Cordua, G. (2005). Understanding the sommelier effect. International journal
of contemporary hospitality management, 17(7), 569-576.
Martin, S. (2001). Industrial organization: a European perspective. OUP Catalogue.
Motta, M. (2004). Competition Policy: Theory and Practise. Cambridge: Cambridge
University Press.
Organisation Internationale de la Vigne et du vin. (2014). Definition of Sommelier,
Resolution OIV-ECO 474-2014.
Ponikvar, N., & Tajnikar, M. (2012). The Impact of Foreign Trade on Markup Size:
Evidence from a Dynamic Panel Model of Slovenian Manufacturing Firms. Eastern
European Economics, 50(1), 46-64.
Preszler, T., & Schmit, T. M. (2009). Factors Affecting Wine Purchase Decisions and
Presence of New York Wines in Upscale New York City Restaurants. Journal of food
distribution research, 40(3), 16-30.
Schmalensee, R. (1989). Inter-industry studies of structure and performance. Ch. 16 in R.
Schmalensee and R. Willig (eds.): Handbook of Industrial Organization, Vol. 2.
Sirieix, L., Remaud, H., Lockshin, L., Thach, L., & Lease, T. (2011). Determinants of
restaurant's owners/managers selection of wines to be offered on the wine list. Journal of
Retailing and Consumer Services, 18(6), 500-508.
Sutton, J. (2001). Technology and Market Structure, Theory and History. Cambridge,
Massachusetts: MIT Press.
281 | P a g e
Thompson, G. M. (2010). Restaurant Profitability Management The Evolution of Restaurant
Revenue Management. Cornell Hospitality Quarterly, 51(3), 308-322.
Yang, S. S., & Lynn Ph D, M. (2009). Wine list characteristics associated with greater wine
sales.
282 | P a g e
Success marketing factors for boutique wineries:
Perception of wine store managers
Tomer Levy
[email protected]
Eli Cohen
Ben Gurion University of the Negev, Department of Management, Israel
[email protected]
University of South Australia, School of Marketing, Australia
[email protected]
Abstract:
Purpose: The purpose of this paper is to examine the most important strategies for small
wineries in wine stores, from the managers’ point of view. There are about 120 small
wineries in Israel. Their wines are sold by a limited number of wine stores.
Methodology: Wine stores owners/managers were interviewed face to face, using a designed
questionnaire, about the importance of marketing structures to improve selling wine produced
by small wineries. Statistical analyses using IBM SPSS were applied to draw conclusions.
Findings: Three factors, implementing principal component analysis, derived from the data
can be interpreted as representing the following: (1) “emphasizing medal”; (2) “wine tasting”
and (3) “wine label”. Tasting wine and medal achieved by the wine perceived as important
factors for both wine consumers and wine stores managers.
Practical implications: In store wine festivals with cooperation of a boutique winery is
suggested. It is recommended that the winemaker of the winery will present the wines during
the event, followed by wine tasting, then offering special prices or the wine that were tasted.
Keywords: Wine stores, boutique wineries, small wineries, premium wine
283 | P a g e
INTRODUCTION
Israel is an emerging country of wine producing. Wine consumption in Israel was mainly for
celebrations for decades. The Israeli wine has been transformed in the last 20 years by
producers to quality and premium wines, mainly due to the modern technologies and
agriculture adopted since 1980. Wine consumers in Israel are looking for wines for pleasure,
with their food or just enjoy drinking. The majority of the wines in Israel are sold in
supermarkets and wine stores, price range between US$5-10. However, wine consumers in
Israel are exposed to foreign wines and are willing to try good wines which are displayed in
wine stores (which sell all kind of spirits but the majority of products is wine). Premium
wines are made in all wineries, the big wineries as well as small wineries, so called “boutique
wineries” (producing up to 100,000 bottles a year), and they are marketed in special wine
stores or in the wineries cellar doors. The number of wineries in Israel is estimated as 300,
but the five big wineries in the country account for 80% of the market, while the boutique
wineries market share is only 2.5% of the total wine volume produced in Israel, and they
produced only premium wines with price tag of US$15 and more. Most of the wines made in
boutique wineries are “high cost” wines and are sold mainly in the winery cellar door or in
specialized wine stores. A crucial marketing issue for boutique wineries is selling their wines
in a wine stores and getting a reasonable profit both for the winery and the wine store.
However, price is used as a trade off against other attributes and the customer willingness to
pay for the wine is correlated with the perceived quality of the wine. Special marketing plans
are required to promote premium wines, mainly because of the high sell price and the cost of
keeping such wines in stock.
Wine stores need to provide consumers with wine affordable prices, even for customers who
are less sensitive about price when purchasing wine for special occasions. Studies on the
impact of wine cues on consumers’ wine purchasing behavior are well documented in the
literature (e.g., Goodman et al., 2006; Mueller and Szolnoki, 2010; Sherman and Tuten,
2011). Koewn and Casey (1995) stated that pricing was extremely important for all
respondents in their study of wine purchasing influences. According to Oczkowski (2010) the
wine price depend on several quality factors and objective characteristics such as reputation
and sensory. Exhibition awards also play as quality signals in wine marketing and contribute
to the price of the wine (Orth and Krska, 2001). Lockshin et al. {, 2000 #14476} highlight the
fact that brand name acts a surrogate for a number of attributes including quality. However,
tasting the wine is still the most concerning risk for consumers, and plays a dominant role for
wine (Mitchell and Greatorex, 1988; Thompson and Vourvachis, 1995). In most cases, tasting
the wine is not possible to taste selection of wines in wine store, hence, consumers try to
select wine based on extrinsic cues such as label, brand, medal to the wine, winemaker and
other extrinsic cues. Lockshin and Corsi (2012) reviewed about hundred articles on wine
consumers’ behavior that published in academic journals between 2004 and 2012. This points
to the growing academic interest in its consumption behavior of wine. Yet, the authors stated
that they do not know consumers’ behavior towards premium/luxury wines as the amount of
empirical research in luxury products is quite low.
284 | P a g e
In this paper we present a possible marketing plan to promote premium wines made by
boutique wineries, with the cooperation of wine stores. This study has been done by
interviewing wine stores owners or managers, using a structured questionnaire. The
questionnaire include a list of 23 attributes related to wine marketing, such as the importance
of wine tasting, medal granted to the wine, label and information on the label. Further to the
questions related to the wine, the questionnaire included information about the size of the
wine store, range of products, profit expectation, preference of purchasing channels and
more.
METHOD
Wine stores owners/managers, who are responsible for the wine purchasing, were
interviewed face to face, using a designed questionnaire, about the importance of marketing
structures to improve selling wine produced by small wineries. A list of 23 attributes related
to wine marketing were included in the questionnaire. Participants were asked to rate each
attribute’s importance in terms of their own perceptions (on a Likert-type 1-5 scale). The
interviewer explained the subjects the purpose of the research and the definition of a
“boutique winery” as follows: “Please rate the importance of the following attributes when
you consider adding wines made by a "boutique winery" to the store wine collection. A
winery is considered as a "boutique winery" if the winery production is less than 100,000
bottles a year.” Statistical analyses using IBM SPSS were applied to draw conclusions. The
questionnaire included demographic questions such as gender and age and questions about
the wine store, the type of beverages in the store, number of wineries represented in the store
and whether boutique wineries sell their wines in the wine store. The data was collected in
Israel between January 2015 and June 2015, in wine stores located in different regions of
Israel (Tel Aviv area 9 stores, Jerusalem area 13 stores and central region of Israel 8 stores).
Table 1 presents the types of the wine stores.
285 | P a g e
Table 1: Wine store Types
No. of wine stores Percentage
Size
<25m2
4
11.8
25-50m2
8
23.5
50-100m2
12
35.3
100-350m2
10
29.4
Total
34
100.0
<=1000
12
35.3
1001-2000
16
47.1
>2000
6
17.6
Total
34
100.0
<=10
5
14.7
11-20
11
32.4
21-30
13
38.2
5
14.7
34
100.0
Number of products in the wine store
Number of boutique wineries in the wine
store
>30
Total
286 | P a g e
RESULTS
The average levels of importance of the features are presented in Table 2 in the order of
importance. The most important attribute was "local wines in store” (4.62 out of 5.00)
followed by “in store wine tasting” (4.56 out of 5.00). The least important features are the
importance of “visitor center in the winery” and “winemaker signature” on the back label,
which are significantly less important of all other features.
Other important factors for wine stores owners/managers are “tasting the wine before
purchase”, “agent knowledge”, “information about aging”, “medal” granted to the wine and
the wine “label”. Other factors such as “winemaker signature” and “visitor center in the
winery” seem to be of least importance (see Table 2). These findings are in agreement with
other studies on wine purchasing by consumers. Orth and Krska (2001) for example, noted
the importance and influence of wines receiving exhibition awards on consumer preferences.
The front label includes information on the wine, brand and variety, while the most common
back label refer to the winemaker, and the type of food matching with the wine as well as
other information about the wine such as the taste, smell, aging and winemaker (Charters et
al., 1999).
It is not straightforward to draw conclusions about the importance of the features that
influence sells of wine in wine stores using simple statistical analysis such as comparing
means. Is the wine label significantly more important than the wine medal or less important
that emphasizing the medal? To explore “bundles” of characteristics and to detect the
underlying dimensions of the participants' perceptions of marketing and selling wine made by
boutique wineries, their perception ratings were subjected to a principal component-based
factor analysis. Seven factors, accounting for 74.7% of the total variance, were extracted
from the data. Factors with eigenvalues greater than 1 were extracted and rotated using the
Varimax method to form an orthogonal structure. For practical reasons and because several
factors include only one feature, the number of principal components were then limited to
only three factors.
Table 3 summarizes the results of the principal component analysis. The rotated factor
structures and the item loadings are presented in Table 4 (only factor loadings above .5 are
presented). The three factors derived from the data can be interpreted as representing core
features, and they are as follows: (1) “emphasizing medal”; (2) “wine tasting” and (3) “wine
label”.
Factor 1, the "emphasizing medal” contributes 25.5% to the total variance and includes five
features that describe the factor and emphasizes the importance of medal/award visibility in
the store. The second factor contributes 15.5% to the total variance and labeled as “wine
tasting” which includes in store wine tasting and tasting during festivals. The “wine label”
represents the front the information on the front and back label and contributes 13.5% of the
total variance.
287 | P a g e
Table 2: Mean scores of perceived importance of wine store features reported by
owners/managers (n=34)
Mean
Std.
Deviation
Local wines in the store
4.62
0.65
In store wine tasting
4.56
1.05
Wine tasting during holidays
4.53
0.93
In store wine festival
4.53
0.93
Agent knowledge and professional
4.53
0.93
Info about aging in barrels
4.50
0.86
Wine tasting before purchase
4.29
1.22
Emphasize medal
4.24
1.13
Wine Label
4.21
1.01
Will medal/award help the consumer decision
4.18
1.19
Promoting local wines & foreign wines
4.18
1.14
Kosher of the wines
4.15
1.10
Info on back label
4.03
1.14
Better negotiation and trade directly with the winery
3.97
1.45
Special package
3.85
1.16
Info on front label
3.82
1.11
In store medal advertising
3.79
1.30
Country wine festival
3.79
1.27
Visiting wine exhibitions
3.79
1.41
Medal/Award
3.71
1.40
Achieving annual goals
3.62
1.39
Visitor center in the winery
2.71
1.47
Winemaker signature
2.29
1.47
288 | P a g e
Table 3: Percentage of variance explained
Factor
% of Variance
explained
Factor
Cumulative %
“label”
1
25.5
25.5
Emphasizing medal
2
15.5
41.0
Wine tasting
3
13.5
54.5
Wine label
Table 4: Factor loadings of wine tourism features (only factor loadings above .5 are
presented)
Component
1
Will medal/award help the consumer decision
.918
Emphasize medal
.904
In store medal advertising
.819
Medal/Award
.708
Visitor center in the winery
.577
2
Wine tasting during holidays
.774
In store wine festival
.689
In store wine tasting
.621
Wine tasting before purchase
.615
3
Winemaker signature
.744
Info on front label
.561
Wine Label
.518
289 | P a g e
CONCLUSIONS
This study highlights the features that are perceived as important to wine stores
owners/managers to promote wines made by boutique wineries in their wine store. Owners
and managers of wine stores in different regions of the country were interviewed and were
asked to rate 23 attributes related to wine marketing. They were asked to rate the attribute on
a 1-5 Likert-type scale, where 1 is low importance and 5 is high importance. Implementation
of principal component factor analysis to the data yields three factors that explain 54.5% of
the variance and can be interpreted as representing core of marketing activities. The three
factors derived from the data can be interpreted as representing the following: (1)
“emphasizing medal”; (2) “wine tasting” and (3) “wine label”. Medal seems to be an
important factor for wine consumers while selecting a bottle of wine. The study by Lockshin
and Cohen (2011) made in 11 countries showed that the majority of wine consumers chose
wine based on cognitive cues which include the brand name and a medal achieved by the
wine. The second segment found in the study called “assurance cues” which includes tasting
the wine and recommendation. The finding of this study in Israel are in agreement with the
factors that found as important for Israeli wine consumers (Cohen, 2009).
The findings of this study are important to the marketing managers of boutique wineries in
constructing a marketing strategies to expose and promote their high cost/premium wines in
wine stores. In store wine festivals with cooperation of a boutique winery is suggested. It is
recommended that the winemaker of the winery will present the wines during the event,
followed by wine tasting, then offering special prices or the wine that were tasted.
*
Acknowledgement: the paper is based on Wine and Spirit MBA thesis, KEDGE Business School
Bordeaux, France
REFERENCES
Charters, S., Lockshin, L., Unwin, T., (1999), “Consumer responses to wine bottle back
labels”, Journal of Wine Research, 10(3), 183-195.
Cohen, E. (2009). “Applying Best-Worst Scaling to Wine Marketing,” International Journal
of Wine Business Research, 21(1):8-23.
Koewn, C. and Casey, M. (1995), "Purchasing Behaviour in the Northern Ireland Wine
Market," British Food Journal, 97 (1), 17-20.
Lockshin, L. and Cohen, E. (2011). “Using Product and Retail Choice Attributes for CrossNational Segmentation,” European Journal of Marketing, 45(7/8):1236-1252.
Lockshin, L. and Corsi, A.M. (2012). “Consumer behaviour for wine 2.0: A review since
2003 and future directions,” Wine Economics and Policy, (1), 2-23.
Lockshin, L., Rasmussen, M. and F. Cleary, F. (2000), "The nature and roles of a wine
brand," Australia and New Zealand Wine Industry Journal, 15 (4), 17-24.
290 | P a g e
Mitchell, V. W. and Greatorex, M. (1988), "Consumer risk perception in the UK wine
market," European Journal of Marketing, 22 (9), 5-15.
Mueller, S., Szolnoki, G. (2010), “The relative influence of packaging, labeling, branding and
sensory attributes on liking and purchase intent: Consumers differ in their responsiveness,”
Food Quality and Preference, 21, 774–783.
Oczkowski, E. (2010), "Hedonic wine price prediction and nonnormal errors," Agribusiness
26(4), 519-535.
Orth, U.R. and Krska, P. (2001), “Quality signals in wine marketing: the role of exhibition
awards,” The International Food and Agribusiness Management Review, 4(4), 385-397.
Sherman, S., Tuten, T. (2011), “Message on a bottle: The wine label's influence,”
International Journal of Wine Business Research, 23(3), 221–234.
Thompson, K. E. and Vourvachis, A. (1995), "Social and attitudinal influences on the
intention to drink wine," International Journal of Wine Marketing, 7 (2), 35-45.
291 | P a g e
How do retail distribution and market share measures relate in the wine
category? A conceptual outline and speculation based on current knowledge
Martin Hirche1
[email protected]
Larry Lockshin1
[email protected]
Luke Greenacre1
[email protected]
Magdalena Nenycz-Thiel1
[email protected]
1
Ehrenberg-Bass Institute for Marketing Science, University of South Australia, Australia
Abstract:
Purpose - This paper attempts to draw a conceptual outline of how the market share –
distribution relationship may be characterised in the wine category. The aim of this paper is to
explain the potential contribution of future research in this area.
Design/Methodology/Approach - Current knowledge of the market share – distribution
relationship is presented and its relevance regarding the wine category discussed. The paper
establishes a range of speculative ideas and assumptions based on relevant concepts and
market as well as category characteristics.
Expected Findings - We expect a typical convex pattern to hold across markets. It is likely
that the convex curve in the wine category is more pronounced compared to less dense and
lower revenue categories {Wilbur, 2014 #13}. The occurrence of outlier brands, which do not
fit the typical pattern is very likely. These could potentially be private label or iconic lowquantity brands, for example. Factors possibly associated with the relationship are
regional/national circumstances, market and retail structure, retailer and store characteristics
such as store performance, or the density of brands/SKUs in the category.
Keywords - Distribution, market share, retail, wine, physical availability
292 | P a g e
INTRODUCTION
The distribution of products is one of the key drivers for sales growth {Ataman, 2008
#12;Ataman, 2010 #23;Kucuk, 2008 #33;Sharp, 2010 #22;Srinivasan, 2010 #25}. Therefore,
the relationship between market share and distribution continues to be of interest to marketers
and academics alike. Typically, this relationship is characterised by an increasing and convex
pattern {Borin, 1991 #38;Farris, 1989 #15;Kruger, 2006 #14;Verbeke, 1994 #29;Wilbur,
2014 #13}. See (Figure 3) for an illustration of how brands or stock-keeping-units (SKUs)
scatter according to the typical relationship pattern.
Even though this convex relationship pattern holds across the majority of product categories,
there are some categories where this pattern does not apply, for example, in small and
sometimes sub-categories of larger categories {Kruger, 2006 #14}. Furthermore, the degree
of “convexity” (how steep the pattern evolves) differs across product categories {Kruger,
2006 #14;Wilbur, 2014 #13}.
Amongst others, wine represents a product category being widely available and consumed in
its major markets and commonly comprising a plethora of different brands and StockKeeping Units (SKUs). Even on a brand-level, SKUs may differ based on grape varieties,
vintage, their provenance, or style among others. The spectrum ranges from very small
boutique brands with limited availability to big international high-volume brands.
This paper attempts to draw a conceptual outline of how the market share – distribution
relationship may be characterised in the wine category across major wine markets.
Figure 3 Scatter Plot of the Typical Convex Market Share - Distribution Relationship (Source: author's own
illustration)
293 | P a g e
2. DEFINITIONS OF METRICS
One of the most important and most commonly used brand-size related brand performance
measures (BPMs) in marketing is market share {Ehrenberg, 2004 #20}. Market share can be
expressed as either volume or value-based percentage and is commonly calculated as
Distribution can be measured in different ways. The most common distribution metrics are:
Physical Distribution:
% of outlets carrying the brand
ACV (All Commodities Volume):
% of total commodity volume sold by stores that stock
the brand
PCV (Product Category Volume): % of total category volume sold by stores that stock the
brand
A brand’s weighted distribution of 80% PCV means that the stores stocking the brand
account for 80% of the Product Category Volume (sales) in the sample of stores compared to
All Commodities Volume (ACV) which is the equivalent measure accounting for the total
store sales of all product categories {Farris, 1989 #15}. Therefore in the case of specialty
stores the measures of ACV and PCV would most likely be almost identical {Farris, 1989
#15}.
3.1.
The market share – distribution relationship
The empirical relation between market share and distribution has been investigated as early
as the 1960’s. {Nuttal, 1965 #37@@author-year} publication on the confectionary category
in the UK market is considered to be one of the first on this relationship. In the following
decades the research in this area has been extended to multiple markets and product
categories. For example, those studies looked at tortilla chips and instant coffee in the USA
{Farris, 1989 #15}, shampoo in Japan {Borin, 1991 #38} or detergents in Holland {Verbeke,
1994 #29} amongst others {Ataman, 2010 #23;Kruger, 2006 #14;Reibstein, 1995 #28}.
294 | P a g e
Over the past years, various methodological approaches to analyse the relationship have been
applied, using cross-sectional time-aggregated data {Borin, 1991 #38;Wilbur, 2014 #13} or
cross-sectional time-series data {Bronnenberg, 2000 #41;Bruno, 2008 #42;Farris, 1989
#15;Kruger, 2006 #14;Reibstein, 1995 #28;Verbeke, 1994 #29}.
{Kruger, 2006 #14@@author-year} found the convex relationship in 95% of the time across
143,356 brands in 263 product categories. Importantly they observed that the 5% of the
categories where the model does not fit are small and sometimes sub-categories of larger
categories. Similarly, {Wilbur, 2014 #13@@author-year} identified an increasing and
convex relationship in 86% of the 37 CPG categories on SKU-level.
As can be seen in Figure 3, this specific relationship pattern entails a Double Jeopardy
phenomenon where high-share brands tend to sell more “per point” of retail distribution than
small-share brands in several categories {Farris, 1989 #15;Kucuk, 2008 #33;Reibstein, 1995
#28}.
In regard to future research needs in this field, {Farris, 2004 #30@@author-year} asked for a
“[…] broader, more systematic comparison of distribution share relationships in different
product categories […]”. Furthermore, {Wilbur, 2014 #13@@author-year} expressed the
need to continue studying the causes and consequences of best versus worst performing
brands and SKUs. Hence, a more systematic approach to investigate the share-distribution
relationship and associated category, brand and SKU characteristics, is needed.
3.2.
The nature of retail distribution of wine
The retailing industry is one of the most important sales channels for wine brands. Storebased retailing remains to be the most significant contributor to overall retail sales in the
major wine markets. In 2014 of the total wine sales, store-based retailing of wine accounted
for 81.5% in the USA, 73.4% in Germany, 66.5% in China, 65.6% in France, or 60.3% in
Italy {Euromonitor, 2015 #75}. Despite the strong increase of non-store based retailing (i.e.
e-commerce, mobile) in the past years, traditional “brick-and-mortar” stores are important
and ever growing in the sector, partly adopting new technologies {Euromonitor, 2015 #18}.
Therefore, making products physically available in the market represents a necessary and
continuing challenge.
To date researchers rather broadly discussed the reasons of the convex pattern, for example,
as potentially being explained by the general structure of retail distribution with few large
stores carrying a wider category assortment and many small stores with limited shelf capacity
mostly carrying the major (high market share) brands {Farris, 1989 #15}. Wine markets have
their distinct retail structure and the share of supermarkets, discounters or specialised retail
stores varies. Structural differences across markets may have implications on how the market
share – distribution pattern evolves in the wine category. In this regard, the conceptual
assumptions are presented in the following.
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4. CONCEPTUAL ASSUMPTIONS
Given the typically high breadth and depth of brands and SKUs in the category of wine, one
would expect a confirmation of the typical convex pattern across markets. {Kruger, 2006
#14@@author-year} illustrate the relationship pattern for wine in the US market. In this
market the pattern can be identified as being typically increasing and convex. It shows that
the slope is more pronounced compared to other beverages categories such as spirits/liquor,
premixed cocktails/coolers or cocktail mixes. This indicates that wine brands need to reach
relatively higher distribution levels in order to grow, compared to other mentioned categories.
{Wilbur, 2014 #13@@author-year} found that the degree of convexity can be higher in
dense (competitive) and high revenue categories.
But past research also showed that there are exceptions in the form of outlier brands, which
are able to gain above average market shares despite their relatively low distribution. The
occurrence of such brands that do not fit the typical pattern can be expected in wine. Private
label brands or scarce iconic brands (e.g. from Champagne) may appear to significantly
deviate from the norm. The distribution of private label brands is naturally restricted due to
their exclusivity to respective retailers and their stores. Despite their limited distribution these
brands may still perform above average, realising relatively high market shares. In relation to
the second example, the scarce iconic brands, similar relationship characteristics may apply.
A somewhat special condition of the product wine is the natural variation of produced
volume over time. Wine producing countries usually have a disproportionately high number
of low and relatively few high volume producers. In Germany, for example, the estimated
average size of a wine producing business (total of approx. 10,000 wine producers) is just
above 6 ha in 2009 {MWVLW, 2010 #76}. This indicates how many different brands
originate from very small producers. Furthermore, the existence of geographically delimited
wine growing regions additionally restricts the production (the Champagne region in France
being one of many examples). The volume produced may also be restricted by (regional)
legal requirements in order to be allowed to use specific quality declarations. {Bhattacharya,
1996 #34@@author-year} note that the market share – distribution relationship may be
relative to regional/national circumstances where small brands may have lower distribution
levels overall but perform relatively better on a regional level (in their regions). A regional
market leader brand may seem to be underrepresented in a national market context, having an
overall low distribution but relatively high market share. These conditions may explain the
existence of such outlier brands that deviate from the typical market-share – distribution
relationship pattern.
Besides the market and retail structure in wine markets, also retailer and store characteristics
as well as brand features may help to explain the relationship. Retail store size seems to affect
the stocking decision-making due to differing shelf space and budget {Farris, 1989
#15;Kucuk, 2008 #33}. Small stores having less shelf space may only have a small
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assortment of SKUs and change this assortment more frequently, likely in response to
consumer preference over time {Shah, 2015 #50}.
Another important determinant of effective distribution outcomes is retail store performance.
It can be argued that store performance plays a major role when aiming to increasing sales by
at least maintaining distribution levels. Store performance may be affected by different
market and store characteristics {Campo, 2004 #57;Campo, 2000 #56;Hoch, 1995
#58;Montgomery, 1997 #59}. Factors such as location, assortment and promotion can be
important determinants of retail sales generation and performance improvements {Wieringa,
2015 #60}. Z
RESEARCH APPROACH
How the retail distribution and market share measures relate in the wine category will be
tested using secondary retail scanner data from major market research data providers.
Competitive repeat-purchase markets to be investigated include USA, UK, Germany and
France. For comparison purposes it is aimed to include 10 to 20 CPG product categories,
including wine. Retail scanner data can potentially be linked to household panel data, which
would result in a wider scope of possible determinants of market performance. Weekly
scanner data will be aggregated and product categories filtered by appropriate
product/brand/SKU hierarchies. Adequate measures of distribution (see 1. above) need to be
identified and evaluated before establishing any analytical framework. In order to properly
estimate the effects of structural distribution antecedents on market performance outcomes,
the market needs to be stationary. Using co-integration techniques {Franses, 1998 #67}
and/or persistence models {Dekimpe, 1999 #65} to overcome non-stationary characteristics
may be advisable.
The identification of mentioned outlier brands will play a role in this study. One possible way
of identifying spatial outliers that do not follow the average market share – distribution line is
a Cluster-Outlier Analysis using Anselin Local Moran’s I {Anselin, 2013 #69}. This analysis
could be exploratory in nature and runs stepwise (including distances of brand points and
their respective value for each independent variable at a time). This would result in
descriptive characteristics and sales and distribution related performance measures of brands
and SKUs in their respective category. Based on these preliminary findings and its
indications the objective could be to identify underlying antecedents (drivers) of retail
distribution having an effect on market share. On the other hand, brands/SKUs that are part of
the average relationship line need to be identified likewise. Standard Deviation (SD) may be
helpful in this regard. Subjects that only deviate within a critical SD threshold may be
considered to fit the line.
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5. CONTRIBUTION
Understanding the market share – distribution relationship enables marketers not just to better
understand the distribution related dynamics in the market, but also to better forecast volumes
and market shares, for example, of newly introduced products by estimating respective
distribution levels {Farris, 2004 #30}. According to a brand’s position on the sharedistribution map, further strategic decisions as to whether investing in distribution and/or the
creation of demand through other marketing activities can be made {Farris, 2004 #30}.
{Farris, 2004 #30@@author-year} correctly states: “The importance of distribution in
determining market share and market structure is probably most apparent to new and small
brands struggling for shelf position.” Such highly competitive conditions for small brands are
exemplary for the wine category. Understanding the nature of wine brands and SKUs in
relation to their market and distribution ‘position’ will ultimately be a foundation for better
strategic decision-making in a retail distribution context. The allocation of resources toward
the distribution and/or advertising/promotion of a wine can be targeted more effectively.
6. REFERENCES
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the Marketing and Share of Category Requirements', Marketing Letters, vol. 7, no. 1, pp. 518.
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scanner data', Marketing Science, vol. 16, no. 4, p. 315.
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Nuttal, C 1965, 'The relationship between sales and distribution of certain confectionery
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Dynamic Impact of Product Availability with Aggregate Data', Journal of Marketing
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Models: An Integrative Approach', Journal of Marketing Research (JMR), vol. 47, no. 4, pp.
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Marketing by What Matters: Using Schwartz’s Theory of Basic Values to
Identify Wine Consumer Segments
Janeen Olsen
[email protected]
Tom Atkin
[email protected]
Liz Thach, MW
[email protected]
___________________________________________________________________________
Abstract:
Purpose - The primary aim of this research study is to explore the use of individual values as
a means to segment the US wine market. They study employs Schwartz’s Theory of Basic
Values. Market segments based on values are created and wine consumer behaviors amongst
value groups are explored.
Design/methodology/approach - An online survey was used to collect data from panel
members in the US. Quantitative analyses were used to explore the relationship between
respondents’ values and their preferred wine behaviors.
Findings - The statistical findings validate the use of the Schwartz value structure to represent
the US marketplace. Four motivational groups reflecting values of self-enhancement,
conservation, self-transcendence and openness to change were identified.
Keywords - personal values, market segmentation, consumer behavior, wine attributes
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1. INTRODUCTION
The market for wine in the United States has grown steadily over the last decade to
become the largest in the world (De La Hamaide, 2014). As wine has become more popular,
its appeal has expanded to new regions and to different demographic and lifestyle groups.
The result of these changes is now the consumer market has become more diverse and selling
wine in the US more complex than ever. Creating effective marketing programs requires a
deep understanding of how consumers differ and how to best tailor market programs to
distinct market segments (Barrena and Sanchez, 2009; Thach and Olsen, 2006). Market
segmentation studies address this important endeavor.
With more than two decades of research, studies on market segmentation within the wine
industry are not new and early studies identified a range of variables for consideration,
including demographics (Sanchez and Gil, 1997), benefits sought (Hall et al., 1994) lifestyles
(Bruwer et al., 2001), and occasions (Dubow, 1992). Although different segmentation
approaches have been advanced, strong support for using those based on socio-demographic
variables to explain wine preferences and consumption has yet to materialize (Fulconis and
Viviani, 2006; Magistris et al., 2011; Mueller et al., 2011). Marketing researchers have come
to the realization that creating groups based on motivation and behavior is a more productive
approach to wine market segmentation (Geraghty and Torres, 2009). From a research
perspective, there remains a need to better understand the motivational factors that drive
behaviors exhibited around wine consumption.
Values explain the motivational basis of attitudes and behaviors (Schwartz, 2011).
Marketing scholars have proposed including values as a method of market segmentation. For
example, Kotler states, “the advantage of using values go deeper than attitudes and behaviors
and can serve to explain behavior over the long term” (2000, p. 267). Values are also
important to marketers because they can be used as a basis for advertising and
communication strategies (Tóth and Totth, 2003).
This study explores the question of whether the four value segments identified by
Schwartz affect wine consumption. A literature review conducted for this study suggests the
answer is yes and the impact can be seen in a wide variety of wine related behaviors.
2.1 Schwartz’s Theory of Values
Schwartz’s theory of values proposes ten different universal values and then determines
how these values relate to each other (Table 1). Next, these 10 values can be arranged to
provide a continuum of related motivations. The values are aligned with the other values with
which they are most congruent and away from those that are most likely to cause conflict. By
grouping values that are contiguous to each other, Schwartz has identified 4 motivational
groups. The groups are 1) Openness to change, 2) Self-enhancement, 3) Conservation, and 4)
Self-transcendence.
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Table 1. Schwartz Basic Values and Goals
Values
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Self Direction
Stimulation
Hedonism
Achievement
Power
Security
Conformity
Tradition
Benevolence,
Universalism
Goals Expressed by the Value
Independent thoughts and actions, freedom, creativity,
Excitement, variety, and novelty
Pleasure, fun and self-gratification
Personal success through demonstrating competence
Social status, prestige, wealth, control and dominance
Safety, harmony and stability
Self-restraint, obedience, self-discipline
Respect and acceptance of cultural and religious traditions
Enhancing the welfare of others with whom one affiliates
Protection of people and nature, sustainability
1. Self-enhancement: This segment has motivations most associated with Selfenhancement and members desire Hedonism and are most likely to find satisfaction from
Achievement and Power. They not only want to be competent, they want the recognition
from others for their abilities. The rewards of their success, such as wealth, prestige, and
status are powerful motivators for this group. They also seek the power and domination that
comes from their mastery of skills. The values held by people in this group are most
congruent with those associated with Openness to change, especially in terms of their shared
value of hedonism, and also with the Conservation segments’ desire for power. People in the
Self-enhancement group may find their motivations most often in conflict with the
benevolence and universalism values held by the Self-transcendence group.
2. Conservation: The broad motivational goal of the Conservation segment incorporates
the values of Security, Conformity and Tradition. A person with strong Conservation goals
seeks personal safety, order and harmony in relationships, and feels that preserving existing
cultural and religious traditions give certainty to life. A person in this group feels this is
accomplished through subordination of one’s own selfish desires. The values of Power and
Benevolence are most congruent for this segment as they may wish to use power to control
others in order to promote harmony, or desire benevolence as a way to foster close
relationships. Values associated with Openness to change, such as Stimulation and Self
Direction, are most likely to create conflict within people in this segment.
3. Self-transcendence: This segment of the continuum refers to strong values of
Universalism and Benevolence. This segment is composed of values associated with the
welfare of others, both those that one closely associates with as well humanity in general.
They value tolerance and understanding as well as equality and a world at peace. Their values
expand to protection of nature and the environment. The values most congruent for members
of this group would be Self Direction with its tolerance for diversity, and Benevolence with
the belief in devotion and maintaining close relationship to members of one’s group. The
values most likely to cause conflict are those of Power and Achievement associated with
Self-enhancement.
4. Openness to change: This motivational segment possesses strong motivations
associated with Self Direction, Stimulations and Hedonism. Therefore, one would expect
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people who are driven by Openness to change to strive for novelty and mastery in their lives
with a strong desire for affective pleasurable arousal. The values associated with Selftranscendence and Self-enhancement would be congruent to these motivations, but those
associated with Conservation may lead to internal conflict.
2.2 Values and Wine Consumption
Spawton (1991) was one of the first scholars to propose incorporating values into wine
market segmentation. Values have been shown to vary across countries and wine
consumption reflects the prevailing culture of the society in which people live (Hall et al.,
1994). In a French context, personal values have been used to explain whether consumers
drink wine and to what extent (d’Hauteville, 2003). They have been employed to better
understand wine market segments based on consumers’ preferred attributes and orientation to
wine (Hall, 1999, Hall and Winchester, 2000).
Several studies employing Means-End Chain methodology, or laddering, show that
values can have a significant influence on the selection of wine on different occasions (Hall
et al, 2001; Oppenheim et al, 2001; Cavicchi et al, 2008). Values, especially those related to
sociality, may influence wine consumption compared to other alcoholic beverages in different
consumption situations in Italy (Agnoli, et al., 2011). Personal values influence the entire
decision making process for selecting a wine in Hungary (Tóth and Totth, 2003). Personal
values have also been shown to relate to wine tourism behavior as well as wine consumption
(Simpson, et al., 2004).
In a review of multiple studies focused on wine and values, several key behaviors have
been identified: wine involvement, subjective wine knowledge, wine tourism, wine
innovativeness, preference for organic wines, and information search (friends and online).
For purposes of brevity, the studies have been summarized in Table 2.
Table 2. Synopsis of Research Implicating Values
Wine Behavior
1. Wine Involvement
2. Subjective Wine
Knowledge
3. Wine Tourism
4. Wine Innovativeness
5. Prefers Organic Wine
6. Global Orientation
7. Information Search
Wine Studies
d’Hauteville, 2003; Hirche and Bruwer, 2014;
Geraghty and Torres, 2009;
Lesschaeve and Bruwer, 2010; Ogbeide and
Bruwer, 2013; Spawton, 1991; Hall et al, 2001;
Oppenheim et al, 2001; Cavicchi et al, 2008
Philippe and Ngobo, 1999;
Values
Hedonism, Security,
Pleasure, Power, Enjoyment,
Self-enhancement
Bruwer and Alant, 2009; Charters and AliKnight, 2002; Hall, 1996; Mitchell and Hall,
2006; Olsen 2009; Simpson et al., 2004.
Goldsmith, 2000; Mueller et al., 2011; Olsen et
al., 2014
Fotopoulos et al., 2003; Mueller et al., 2011;
Olsen et al., 2012
Magistris et al., 2011, Mueller et al., 2011
Stimulation, Power,
Hedonism, Self-direction,
Benevolence
Self-direction, Stimulation
Hedonism, Power, Security
Hedonism, Conformity,
Universalism
Tradition, Stimulation,
Conformity
Hedonism, Achievement,
Conformity,
Fulconis and Viviani, 2006
Tóth and Totth, 2003
Self-direction, Achievement
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The research questions addressed in this study are whether the pattern of values
identified by Schwartz’s Theory of Basic Values can be replicated within the population of
US wine drinkers, and if so, how does a person’s value orientation relate to important areas of
wine consumption? This exploratory study does not propose directional hypotheses at this
point, but it does anticipate group differences. Hypothesis 1 relates to whether our sample is
able to replicate Schwartz’s Theory of Basic Values. Hypotheses 2-9 are related to the values
held by the 4 segments and aspects of wine consumption behavior.
H1: Four value segments of the US wine drinking population can be identified similar to the
4 value orientations identified in Schwartz’s Theory of Basic Values.
H2: Differences in the means for levels of wine involvement exist among the 4 value
segments.
H3: Differences in the means for subjective wine knowledge exist among the 4 value
segments.
H4: Differences in the means for enjoyment of wine tourism exist among the 4 value
segments.
H5: Differences in the means for degree of wine innovativeness exist among the 4 value
segments.
H6: Differences in the means for consumers’ global wine orientation exist among the 4 value
segments.
H7: Differences in the means for consumers’ preference for organic wine exist among the 4
value segments.
H8: Differences in the means for consumers’ likelihood to consult friends about wine
purchases exist among the 4 value segments.
H9: Differences in the means for consumers’ likelihood to consult online sources about wine
exist among the 4 value segments.
3. METHODOLOGY AND RESULTS
Data were obtained from an online study conducted in 2014 of respondents from the
United States. The sample consisted of 977 usable surveys from respondents from all 50
states. Survey Monkey was used to create and administer the survey, and respondents were
obtained from a panel data provider, Survey Sampling International. To participate in the
study, respondents were screened to be over 21 and at least occasional drinkers of wine.
Measures for values and wine related behaviors were adapted from previous research and
Likert type scales (6 point for values, 5 point for wine related behaviors) were used to
indicate agreement or disagreement with items on the questionnaire (see Table 3 and 4). The
research first determined whether the data reflected the value structure identified by
305 | P a g e
Schwartz. Cluster analysis, using the 10 universal values was done to create a four-segment
solution. To remove possible response bias the analysis used within-line standardization.
A four-group solution was identified that approximated the 4 domains proposed by
Schwartz, 1) Self-enhancement, 2) Conservation, 3), Self-transcendence, and 4) Openness to
change. ANOVA was used to describe membership in each of the 4 groups using the 10 values
measured in the study. A lower mean score indicates greater agreement with the measure.
Significance at the .05 level is indicated by an asterisk. Duncan’s Post hoc test was employed
to determine which groups significantly differed from others. The F-test indicates whether
there is a significant difference to be found in the means, but with more than 2 groups, it is not
possible to tell from the ANOVA alone whether it is group 1 mean that differs from the mean
for group 2, 3 and 4, or whether it is group 2, 3 or 4 whose mean differs, or whether all 4
groups means are significantly different from each other. (See Table 3.)
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Table 3. ANOVA for 4 Value Motivational Groups
OPENNESS TO CHANGE
1. It is very important to think up new
ideas and to be very creative.
(SELF-DIRECTION)
2. It is very important to have an
exciting life and to have adventure
and take risks.
(STIMULATION)
3. It is very important to have a lot of
fun, and to enjoy life.
(HEDONISM)
SELF-ENHANCEMENT
4. It is very important to be successful
in life and to have others recognize
me for my achievements.
(ACHIEVEMENT)
5. It is very important to have a lot of
money and expensive things.
(POWER)
CONSERVATION
6. It is very important to live in safe,
secure surroundings and to avoid
anything that might be dangerous.
(SECURITY)
7. It is very important to behave
properly and to avoid doing things
most good people would say are
wrong.
(CONFORMITY)
8. Traditions are very important and
one should try to follow the customs
handed down from religion or family.
(TRADITION)
SELF TRANSCENDENCE
9. It is very important to help people
and to care for the wellbeing of
others.
(BENEVOLANCE)
10. It is very important to look after
the environment and to care for
nature.
(UNIVERSALISM)
1. SE
N=411
2. C
N=214
3. ST
N=139
4. OC
N=213
F
SIGNIFICANT
GROUPS - Duncan’s
Post hoc Test
2.69
3.34
2.53
2.17
33.46*
4 from 3, 1, from 2
2.73
4.13
2.95
2.38
80.77*
4 from 1, 3 from 2
2.67
2.43
1.68
1.73
60.42*
3, 4 from 2 from 1
2.56
3.64
3.73
3.04
47.66*
1 from 4 from 3, 2
2.81
4.74
5.15
4.18
230.71*
1 from 4 from 3 from
2
2.56
2.08
2.41
3.31
40.27*
2 from 3, 1 from 4
2.60
1.93
2.46
3.63
75.05*
2 from 3, 1 from 4
2.70
2.07
2.28
3.33
40.09*
2, 3 from 2 from 4
2.73
2.43
1.68
1.73
63.35*
3 from 4, 2, from 1
2.81
2.53
1.86
2.36
24.70*
3 from 4, 2 from 1
Next, ANOVA was used to determine if the 4 segments differed in aspects of wine
consumer behavior. A significant F statistic determined that the value groups did differ on the
8 different aspects of wine behavior explored in this research. Again, Duncan’s Post hoc test
was employed to determine which groups significantly differed from others. (See Table 4.)
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Table 4. Value Structures and Wine Consumer Behavior
1 SE
Wine Involvement*
4.08
Subjective Wine Knowledge- novice, 2.28
intermediate, advanced, connoisseur
Wine Tourism, enjoys visiting
3.85
wineries in different regions
Wine Innovativeness, likes new and
3.86
unusual wines
Global wine orientation, likes to try
3.95
wines from different countries
Prefers organic wine
3.53
Information search, consults friends
2.53
Information search, consults online
2.53
sources
*5 Item Scale, Chronbach’s Alpha .89
2C
3.63
1.80
3 ST
3.93
1.94
4 OC
4.03
2.15
F
20.18
24.28
Significant Groups
2 from 3, 4; from 4, 1
2, 3 from 4 from 1
3.67
3.65
3.92
4.04
3, 2 from 1, 4
3.09
3.71
3.78
33.10
2 from 3, 4, 1
3.70
4.16
4.10
11.31
2 from 1, 4; from 4, 3
3.16
1.65
1.67
3.46
1.78
1.99
3.53
2.11
2.27
9.81
40.86
34.66
2 from 3, 4, 1
2, 3 from 4; from 1
2 from 3 from 4 from 1
The results of the analysis demonstrate the four groups are somewhat distinct in terms of
their wine consumer behavior. The differences are summarized below.
1. Segment motivated by Self-enhancement: These wine consumers exhibit motives for
having fun, but also want to find personal success through status and prestige. They are
relatively high on wine involvement, have the highest subjective wine knowledge, enjoy wine
tourism, and show the most wine innovativeness. They are mid-range in global wine
orientation. They show slightly more interest in organic wines, and are most likely to consult
with outside sources about wine, both with friends and online.
2. Segment motivated by Conservatism: These wine consumers with more traditional
and security based values have the lowest reported scores for the wine related behaviors.
Although they drink wine, they are not as heavily involved with the product category and do
not feel they are very knowledgeable. This pattern is also reflected in their wine choices.
They are not as interested in visiting wine regions, trying new or unusual wines, imported or
organic wines. Perhaps due to their lack of interest or curiosity, they are also least likely to
consult with friends or online sources about wine.
3. Segment motivated by Self-transcendence. These wine consumers, with a strong
interest in humanity and nature, ranked in the middle on most of the measures of wine-related
behavior. The one measure where they are the highest is with having a global orientation and
trying wines from different countries. They show some interest in organic wines as do 2 other
groups, but they do not have the highest mean on this measure as might be expected given
their concern for nature and the environment.
4. Segment motivated by Openness to change: These wine consumers with their
motivations for novelty, stimulation, pleasure and mastery scored high on most measures of
wine related behavior. This group of consumers is quite similar to the Self-enhancement
segment in most regards. They see themselves as slightly less knowledgeable than members
of group 1, perhaps because they are also less likely to consult with friends and online
sources about wine.
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5. DISCUSSION, LIMITATIONS AND CONCLUSIONS
This study has several implications for wine academics and practitioners alike. In terms
of academics, this study supports previous research showing that consumers who are more
involved with wine have values associated with Hedonism, Pleasure, Power, Enjoyment, and
Novelty (d’Hauteville, 2003; Hirche and Bruwer, 2014; Geraghty and Torres, 2009;
Lesschaeve and Bruwer, 2010; Ogbeide and Bruwer, 2013; Spawton, 1991). These types of
consumers fall into Schwartz’s two segments of Self-enhancement and Openness to change.
The study also highlights that US consumers who are the least involved with wine are
motivated by Conservatism with a key value of Security.
In terms of practical implications, this study can be useful for wine marketers in targeting
distinct promotional messages around these four value groupings. For example, marketers
targeting consumers with values for Self-enhancement may want to show advertisements
emphasizing people having fun with wine, as well as appearing successful in their careers,
and visiting wine tourism regions around the world. Since this segment is savvier regarding
technology, they could also use digital marketing to reach this group. Conversely for
consumers falling into Schwartz’s segment of Conservatism, marketers may want to
emphasize traditional values such as using wine in family settings or for special celebrations.
Focusing on consistency of taste and style in wine would also be appealing to this group.
In addition, operations of the winery can be adapted to appeal to certain value segments,
such as using sustainable winemaking and vineyard practices. While it might be expected
that these efforts would appeal to the members of the Self-transcendence group due to their
interest in nature and the environment, our research shows that the Openness to change and
Self-enhancement group would respond equally well to such positioning.
As the Direct to Consumer portion of sales has become more important to many
wineries’ profits, it is critical to retain club members over the long run. Creating wine events
to appeal to segments based on values can help maintain close customer relationships and
encourage repeat business. For example, members of the Self-enhancement group may enjoy
more upscale, formal wine events where they can show off the accouterments of their status
and success, while members of the Self-transcendence group may find such affairs too
ostentatious. Conservation members may enjoy more informal family style events such as
picnics and BBQs, while members of the Openness to change group might appreciate events
that are more unusual and creative, such as costume parties.
There are several limitations to this study which highlight future areas for research.
Though the sample includes wine consumers from all 50 states, it is based on panel data and
is therefore not a representative sample. Also the study did not collect detailed information
about preferred brands and digital marketed platforms used. For future studies, it would be
useful to identify a random sample and add more detailed questions. The study also did not
look at the impact of life circumstances, such as age and life cycle stages on a person’s
values. Schwartz makes a point in his writings that these life circumstances can shape one’s
values. Future research should consider the interaction of life circumstances and values on
309 | P a g e
wine consumption behavior. It would also be interesting to conduct this study across
countries to identify potential international differences.
In conclusion, the findings of this study suggest that consumers’ motivations as derived
from their innate value structure do play a role in shaping their wine related behaviors.
Schwartz’s Theory of Basic Values appears to be one way to incorporate values into
scholarly research on wine behavior. Market segmentation studies in the wine industry should
continue to use values as a means to provide a richer description of wine consumers.
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For the Love of Country: How Origin-related Affect Influences Consumer
Wine Evaluation and Preference
Roberta Crouch
ESC Dijon Bourgogne, School of Wine and Spirits, France
[email protected]
[email protected]
Ulrich R. Orth
[email protected]
Vinh N. Lu
The Australian National University, Australia
[email protected]
Abstract:
Purpose - This paper presents a cross-national investigation of how the affect consumers
hold towards a country (Australia) influences their evaluation of and preference for wine
from that country.
Design/methodology/approach - Seated in seven countries around the globe, two studies, one
qualitative (21 focus groups, N=138) and the other quantitative (an online survey; N=2,039)
examine how country of origin influences consumer evaluation (and, ultimately, preference)
through affective (warmth) and cognitive (country, people, and food associations) pathways.
Findings - Study 1 yields initial evidence that the affect consumers hold towards an origin,
jointly with origin-related associations about the country, its people, and foods influences
consumer response. Study 2 shows origin-related affect relates positively to consumer
preference for wines from Australia, but the study also shows that associations (country,
people, and food) can lower preferences. Cultural similarity enhances the effect of warmth
on wine evaluation, whereas subjective wine knowledge has no such moderating influence.
Practical implications - Given the impact country affect has on wine preferences with both
novice and expert consumers, especially in more similar cultures, wine marketers may be
interested in benefitting from the findings by joining forces with tourism managers to create
more positive affect towards their wines’ origin.
Keywords: Competence, country-of-origin, stereotype-content model, warmth
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1. INTRODUCTION
Governments and tourism managers worldwide spend large amounts of money to generate
positive feelings towards their countries, regions and cities. Nevertheless, country of origin
(COO) research has predominantly focused on consumers’ conscious thoughts, associations,
cognitions and assumptions about places and the products originating from those places
(Josiassen et al., 2013). Whilst COO influences have been studied extensively for decades
(Bilkey and Nes, 1982), only recently has the notion emerged that affect toward countries can
influence the evaluation of products (Chen et al., 2014). In spite of a long history of research
investigating the power of COO based beliefs on consumer response, this area of
investigation remains relevant and continues to yield powerful results for managers. The
increasingly integrated global marketplace has resulted in the proliferation of ‘hybrid’
products and services branded and/or designed in one country but manufactured or assembled
in many. Wine remains essentially a ‘single-origin’ product and one where the respective
COO remains a significant cue to consumers for quality.
Drawing from the literature on COO and the stereotype-content (SC) model (Fiske et al.,
2002), we propose that origin-related affect (warmth), jointly with origin-related cognitions
(competence), influences consumer evaluation of wine from a specific country, with effects
ultimately extending to preference. Warmth captures the (positive) affect consumers hold
towards an origin (Chattalas et al., 2008). For example, U.S. consumers may have positive
feelings towards Australia and those feelings will flow on to positively influence their
evaluation of Australian wines. Over time countries may also gain strong reputations for
producing certain products (e.g., China for silk or Scotland for whiskey); a strong association
or ‘congruence’ between these products and their COO develops, leading consumers to
strongly believe in their competence to produce high quality in these categories (Srikantanyoo
and Gnoth, 2002). Hence, consumer cognitions will reflect their own experience, associations
and assumptions respective to a country, its people and products (Chen et al., 2014; Han,
1989, 1990). For example, consumers associate France and the French with competence in
fine foods and fine wines and, thus, will evaluate wines from France more favorably.
In addition, we test the prediction that two consumer attributes will moderate the relationship
between country affect and consumer evaluation of wine. Subjective wine knowledge
(differences between novices and those that see themselves as experts) should attenuate the
effect, as novices may rely more on country affect in evaluating wine than experts (Veale,
2008). On the other hand, perceived cultural similarity with the country of wine origin should
moderate the relationship such that the influence of country affect will be stronger when
consumers perceive their own culture as more, rather than less, similar to the culture where
the wine originated (Alden et al., 2009).
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2. LITERATURE AND HYPOTHESES
2.1. Country Stereotypes and Affect
Stereotypes are fixed impressions that people hold (Katz and Braly, 1933) and can be
defined as a socially shared set of beliefs about traits of people (Steele et al., 2002) or places
(Herz and Diamantopoulos, 2013). Country stereotypes are formed directly via experiencing
a country and/or its products and services, or indirectly via media exposure and personal
communications (Verlegh and Steenkamp, 1999). Notably, country stereotypes can evoke
not only cognitive, but also affective responses (Chen et al., 2014), influencing consumers’
evaluation of products and brands (Chattalas et al., 2008).
Originally developed in an interpersonal relationship context, a key property of the SC model
is that it includes two primary dimensions of people's response to stereotypes: warmth and
competence (Fiske et al., 2002). Adaptations and extensions of the SC model have been
proposed to explain not only a person’s evaluation of other people, but also consumer
response to firms (Aaker et al., 2010) and brands (Aaker et al., 2012). The SC model has
even been suggested to explain response to national stereotypes for general products and
consumer electronics (Chattalas et al., 2008; Chen et al., 2014). Given the unanimously
positive influence of country affect on consumer evaluative judgment, we expect:
Hypothesis 1a: Positive affect towards a country will positively influence consumers'
evaluation of wine from that origin.
A substantial body of research has focused on COO effects in general (Chattalas, et al,
2008; Han, 1989, 1990; Piron 2000; Srikantanyoo and Gnoth, 2002) and in the context of
wine (e.g., D'Alessandro and Petotich, 2013; Moulard et al., 2015). Those studies converge
on the finding that the associations, cognitions, and conscious thoughts people infer from an
origin are powerful predictors of their evaluation of and response to wines from that place.
Integrating the general and the wine-specific COO literature with recent advances of the SC
model, we maintain:
Hypothesis 1b: The positive influence of country affect on wine evaluation will persist when
cognitions about country, people, and food are included as additional predictors.
2.2. Knowledge and Cultural Similarity
The knowledge people possess about a product category (their objective knowledge) and
how much they believe they know (subjective knowledge) can be a major differentiator in
their response to offers from that category (Alba and Hutchinson, 1987), including their
evaluation of products from a specific origin (Schaefer, 1997). In the wine category,
individual knowledge has been shown to influence what cues (including information about
the origin) consumers rely on to infer quality (e.g., Viot, 2012), and the preferences they
form based on those inferences (Guidry et al., 2009). Integrating the SC model with reports
that novices rely more on COO cues than do those that rely more on their own experience
and knowledge (D'Alessandro and Pecotich, 2013), we expect:
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Hypothesis 2a: Subjective wine knowledge will attenuate the effect of country affect on
evaluative judgments.
Much research attests to self-continuity or self-verification as a key motivator in an
individual’s efforts to maintain a clear and functional sense of who they are (Swann, 2012).
This need for a consistent and stable sense of ‘self’ is met typically through assessments of
similarity between one's sense of self and others (Seih et al., 2013). Culture researchers have
pointed to the important role of the perceived difference (or similarity) between one's own
culture and other cultures (e.g., Sousa and Bradley, 2008). Integrating cultural similarity
studies with the affect-as-information (Schwarz, 2013) and affect infusion models (Forgas,
1995), we argue that country affect should lead to more favorable evaluation when
consumers perceive the culture of the origin of a product is perceived to be similar to their
own because related affect will be perceived as more diagnostic. We thus hypothesize:
Hypothesis 2b: Perceived cultural similarity will enhance the effect of country affect on
evaluative judgment.
3. EMPIRICAL STUDIES
We tested these predictions in the context of country affect to Australia and consumer
judgment of Australian wines via two studies. In Study 1, we examined consumer narratives
of perceptions of, and responses to, wine origins through focus group discussions in seven
countries (China, India, Vietnam, Indonesia, Korea, the USA and the UK). In Study 2, we
collected data from wine consumers recruited via an international commercial market
research company in these seven countries.
3.1. Study 1: Focus Groups
The purpose of Study 1 was to generate initial evidence for and against the notion that the
affect consumers hold towards a country influences their evaluation of and preference for
wine from that country. In addition, the study identifies individual and cultural difference
variables that possibly moderate (i.e., mute or enhance) the impact of affect on preference.
3.1.1. Method
Study 1 employed three focus groups of wine consumers in each country (N = 138). There
were six to eight participants in each group, which was generally balanced in gender.
Consumers were screened to ensure that each purchased wine at least four times per month.
Local facilitators from each country conducted the group discussions according to a
consistent discussion guide. Consumers were first asked their opinions regarding the
attributes they considered essential in a very high quality wine. Then they were asked to
identify countries that, in their view, were highly likely to produce wines of this high quality,
and alternatively, those countries they felt less able. Participants also provided descriptors
and their feelings specific to these countries, their people and the foods eaten there.
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Content analysis of the transcribed group discussions revealed that whilst there were some
minor differences noted in terms of opinions respective to each country discussed, results
were generally consistent with regard to what constituted a ‘fine wine’, where those wines
were most likely to be produced and the identification of those countries less likely to
consistently produce the fine wines. France was cited by the majority of consumers, in each
group in each country, as the country that produced the ‘best wine’ with Italy typically cited
as producing almost as good, and sometimes superior wines. Following these two leaders,
Germany and Spain were reported but with much more mixed results. After that, countries
like Australia, South Africa, New Zealand (for white wines), Chile and Argentina were listed
in varying order of expectations. Some individuals in the UK and the USA were ‘fans’ of
Australian wines and, indeed, wines from other new world producers as well. However, it
was clear that these wine consumers strongly believed that the ‘best’ wine comes France or
Italy – otherwise you risked being disappointed. Moreover, there was also a consistently
strong belief (strongest in the UK and the USA) that the ability to produce ‘fine wine’ was
inalterably linked to a country’s ability to produce fine food – and to understand what fine
food is. For example, a respondent in the USA stated emphatically, “People who know
nothing about fine food, can know nothing about fine wine!” It was also important to note that
some negative country associations were not seen to impact on a country’s ability to produce
top quality wines. Whilst respondents believed, for example, that Italy was a bit ‘chaotic’ and
old and inefficient and Italians can be ‘temperamental’ and ‘emotional’ – they were also
described, overall, as ‘passionate’ artisans that knew what high quality was and how to
produce it across a number of product categories including food and wine. Similarly, beliefs
regarding France and French nationals were not always complimentary. But, there too was
common agreement that world famous, high quality brands came from France and they had a
clear understanding of the ‘finer things in life’ and had a long history of producing them.
These responses reflect the multi-dimensional aspects of the COO associations for these
countries and contrast sharply with the strongly uni-dimensional impressions and
stereotypical beliefs about Australia, Australian wines and Australians. Generally, Australia
enjoyed strong support in every country as a highly desirable holiday destination - a very
action oriented and exciting place to be. Those that had visited Australia spoke highly of their
visit and the highly stimulating experiences they had enjoyed. Terms such as ‘hot’, ‘rough’,
‘beautiful’, ‘strong’ and ‘exciting’ were used often. As people, Australians were described as
‘tough’, ‘tanned’, ‘hardy’, ‘loud’, ‘friendly’, ‘humorous’ and ‘big and strong’. However,
terms such as ‘passionate’, ‘romantic’, ‘sophisticated’, or ‘well educated’ were not heard.
Importantly, it was clear from the active and open feedback of participants in each country
that these discussions evoked clear COO based imagery, associations and emotive reactions –
both positive and negative. It was also evident that beliefs about Australia were not generally
congruent with those same beliefs and/or emotional reactions found to be associated with
countries where a fine wine could be consistently produced. Overall, the focus groups
strongly endorsed quantifying cognitive and emotional reactions to COOs and their ultimate
effect on the evaluation of and preference for wine from that country.
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3.2. Study 2: Cross-national Survey
The purpose of Study 2 was to formally test the hypothesized relationships through a
quantitative survey of consumers in the seven countries.
3.2.1. Method
Australia was chosen as the country of origin of interest, but other wine origins (e.g.,
Argentina, Chile, France, Italy, New Zealand, Spain, and the U.S.) were also examined. Data
was obtained through an online survey from 2,039 wine consumers (mean age = 38.6 years,
48.3% females) in China (N=301), India (N=302), Indonesia (N=279), Korea (N=270), the
U.K. (N=301), the U.S.A. (N=284), and Vietnam (N=302).
Because countries are multidimensional stereotypical constructs (Chen et al., 2014), we
assessed country-related associations at three levels: cognitions related to the country’s
competence in general, cognitions on the competence of the country’s people/workforce, and
cognitions related to the country’s competence in food specifically. Established and
previously validated scales include Aaker et al.’s (1986) four-item measure of warmth to
assess country affect (enthusiastic, happy, pleased, excited; α=.87, M=5.37), seven items of
d’Astous and Boujbel’s (2007) country personality scale to assess associations with
Australia’s competence overall (α=.91, M=5.01), a second group of 12 items to assess
associations related to the competence of Australian people (α=.81, M=5.16), and a third
group of nine items to assess associations on Australia’s competence in food (α=.91,
M=5.01). Additional measures included Heslop et al.’s (2010) scale to assess consumers’
evaluation of wine (α=.92, M=5.10), Souse and Bradley’s (2006) six-item measure of cultural
similarity (α=.94, M=4.40), Flynn and Goldsmith’s (1999) nine-item measure of wine
knowledge (α=.92, M=4.89), and a single-item measure of preference for wine from Australia
(Zikmund and Babin, 2009).
The predicted effects of country-of-origin were analyzed through a series of regressions.
Wine evaluation was the dependent variable; country associations, people associations, food
associations, country affect, and its interaction terms were the independent variables.
Variables were mean-centered before computing the interaction variables (Jaccard et al.,
1990). The results of the hierarchical regression model appear in Table 1.
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Table 1. Results of Hierarchical Regression Model for Wine Evaluation
Main effects only
Main effects + two-way
interactions *
B
t
B
t
Constant
.11
1.51
.03
-.15
Country Associations
.23
12.21
.21
11.34
People Associations
.24
10.31
.22
9.68
Food Associations
.42
19.21
.39
18.10
Affect
.09
5.54
.08
1.71
Cultural Similarity (CS)
.02
1.91
.06
1.39
Wine Knowledge (WK)
.07
6.60
.02
.45
Affect x CS
.08
3.14
Affect x WK
.01
1.07
Adjusted R²
.71
.77
Note: B=unstandardized coefficient, bold entries denote p < .05
Country affect had a significant positive effect on wine evaluation, supporting hypothesis 1a.
This effect persisted in the presence of cognitive predictors (country associations, people
associations, and food associations), hereby supporting hypothesis 1b. We further expected
country affect to interact with cultural similarity and wine knowledge to influence wine
evaluation. Conforming to our expectation in hypothesis 2a, the interaction term of Affect x
Cultural Similarity was significant, indicating that a greater cultural similarity enhances the
influence of affect on wine evaluation. Wine knowledge, in contrast, had a significant direct
effect on wine evaluation, but did not interact with country affect. This finding does not
support hypothesis 2b.
4. DISCUSSION
Our study confirms that, in addition to cognitive reactions to COO, country affect has the
power to influence consumer evaluations of wine and their wine preference developing from
those evaluations. The study also reveals the need to investigate the respective power of
product country associations and those strongly linked to the primary product under
investigation (food and people). Our results also highlight that in the case of products, such as
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wine, where there is believed to be more than a need for objective competency in the
producer, consumers are engaged by the emotional make-up of the wine makers themselves
and their cultural associations, for example the ‘passion’ and ‘sophistication’ of the French
and the Italians – their history as ‘artisans’. Whilst in past, country associations alone have
been investigated or country product image with country person image largely under
explored, this research accounts for these constructs as well as for two consumer
characteristics found to be influential. In support of previous studies, consumers in this
research also showed a positive bias due to cultural similarity highlighting the opportunities
and the challenges for international wine exporters. The insignificant result for knowledge
when assessed with cultural congruency further illustrates the strong ability of COO factors
to overcome a cognitively based consumer attribute.
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The emphasis on people and place in the identity and marketing of two
premium Australian wineries
Amie Sexton
The University of Melbourne, Australia
[email protected]
Abstract:
Purpose - To explore the emphasis on people and place in the identity and marketing of two
wine producers in The Grampians region of Australia.
Design/methodology/approach - The research employs ethnographic case studies of two
premium wine producers to explore the emphasis on people and place in winery
communications material. Based largely on website and marketing material, the paper first
describes how the producers emphasise people and place, then discusses reasons for doing so
and the implications of this emphasis.
Findings - A number of reasons are suggested to explain why these producers emphasise the
people and place in their communications: producer identity and values, geographical
isolation, providing a context for the wines, enhancing authenticity and connecting with
consumers in a culturally relevant manner.
Keywords: Australia, Grampians, wine producers, terroir
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INTRODUCTION
In the increasingly corporate and global world of wine production it is all too easy for
consumers to lose sight of where their wine comes from and who makes it. Against a
backdrop of call centres with stock and massive brands selling blended wine from South
Eastern Australia, some smaller wineries are actively emphasising the place – the vineyard
and winery where the wine is produced – and their people – the owners and staff – in
communications with consumers. On wine labels and descriptions, on the website and in
press releases, references to the people and place behind the bottle of wine highlight “the
traditional role of wine in human life, its way of connecting people to the land and to one
another” {McGee, 2007 #273}. In doing so, producers are asserting the importance of
people, place, history and culture in the production of a wine. This concept is not new and is
akin to the French notion of terroir. There is much debate about the term terroir and its
definition {Charters, 2006 #193}, its appropriation by New World wine countries {Barham,
2003 #253}, and its significance for different groups {Spielmann, 2012 #251}. In academia,
the wine industry and in the mainstream media, the word terroir is employed with varying
definitions, however the aim of this paper is not to debate the “incongruent interpretations of
terroir” {Spielmann, 2012 #251}, rather to investigate the emphasis on people and place in
developing winery identity and marketing. The research uses case studies of two wineries in
The Grampians region of Victoria, Australia to explore the concept.
1. METHODOLOGY
This paper is part a larger anthropological research project investigating how wine producers
perceive their winery and how the winery’s identity and image are developed in Australia and
France. Despite significant research on wine consumption in business and marketing, and the
establishment of wine as a field of anthropological study, there is still very little research on
wine producers and their identity. Ulin’s research (1996) investigating power relations
between large and small Bordeaux wine producers, and Beverland’s (2009) research on brand
authenticity from a consumer marketing perspective provide interesting insights into wine
producers and suggest the need for further research on wine producers from a social
perspective.
In this paper, case studies of two Australian wine producers are presented to explore how and
why wine producers emphasise people and place in marketing and communications material.
The two cases were deliberately selected for contrasting situations {Yin, 2009 #221},
providing different perspectives from the region: a family-owned, ‘old’ wine producer
(established during or prior to the mid nineteenth century), and a company-owned, ‘new’
wine producer (established during or after the rejuvenation of the Australian wine industry in
the 1960s). A small number of cases presents a good basis for analytical generalisation,
leading to hypotheses that may be tested later through explanatory research {Eisenhardt, 1989
#219}. It is particularly appropriate where little research exists in the field, as is the case with
anthropological research on wine {Black, 2013 #267}, particularly on wine producers.
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The research employed an ethnographical grounded theory approach {Pettigrew, 2000 #276}
to data collection and interpretation. The data was collected from 2009 to 2015, and included
published material (online and print) and media coverage, interviews, observations, and
informally gathered information from a variety of sources. From interview transcripts, field
notes and documents, a thick ethnographical description {Geertz, 1975 #277} of each case
was created. Following this ethnographical interpretation of the data, the data was coded
following the grounded theory method of constant comparison {Bryant, 2007 #279} to
produce analytical categories and suggest a theoretical interpretation of the data.
2. CASE STUDIES
Both case studies are situated in The Grampians region of Victoria, approximately 200km
west of Melbourne in the south east of Australia. The region is geographically isolated from
major cities and is sparsely populated, with around two dozen wineries dotted throughout a
predominantly agricultural area. The Grampians is not a wine tourism destination in itself
however wineries do attract some cellar door visitors as a secondary activity. As cellar door
and local sales are a small percentage of the wineries’ business, marketing and
communications are critical for generating sales and developing a reputation. The two
wineries selected for the case studies are producers of premium and super-premium wines
(above AUD$12 wholesale, pre-tax per bottle {Anderson, 2011 #278}), have a prestigious
reputation in Australia and in export markets, and produce two of Australia’s most respected
and highly priced red wines.
2.1.
Case Study #1: Mount Langi Ghiran
Mount Langi Ghiran is famed for the Langi Shiraz and also produces a range of Shiraz,
Cabernet, Pinot Gris, Riesling, and Sparkling Shiraz, the latter a speciality of The Grampians
region. It is owned by the Rathbone Wine Group whose portfolio includes premium wine
brands Yering Station, Yarra Bank, Parker Coonawarra Estate and Xanadu Wines. Mount
Langi Ghiran takes its name from the granite peaks of a mountain rising from the flat plains
of western Victoria, aligning the wines instantly with the place where they are made. The use
of the Aboriginal name, meaning “home of the black cockatoo”, evokes the timelessness and
permanence of this impressive geographical landmark, subtly appropriating its ancient history
to support just forty years of winemaking. Other references to place are overt, such as the
history page of the website, where the reader is told explicitly that “the vineyard …
encapsulates an extraordinary sense of place.” {Mount Langi Ghiran, 2015 #269}
The connection to place is enhanced through the naming of the wines: all Mount Langi
Ghiran wines named after a geographical feature or vineyard. The Billi Billi range after the
Billy Billy Creek; the Cliff Edge range after the dramatic granite cliff face behind the winery;
several wines identified by particular vineyard parcels – “Old Block” Shiraz, and “Double
Vineyard” Shiraz; and the flagship wine, simply called “Langi Shiraz”. Mount Langi
Ghiran’s emphasis clearly centres on the place. Naming wines after the unchanging landscape
creates a permanence for the brand’s identity that is independent of changes in personnel or
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company ownership. Only one wine is named in honour of a person, winemaker Trevor Mast,
who was responsible for establishing Langi’s reputation. As head winemaker at Mount Langi
Ghiran from 1978 until his retirement in 2006, the association is firmly cemented in the
history of the winery.
Descriptions of individual wines are also centred on place, as the opening phrase of the Cliff
Edge Shiraz illustrates: “The wine showcases distinct Grampians regional character…” In
some instances the descriptions go into fine detail. A very tight combination of place and
people is presented in the story of the Mount Langi Ghiran Double Vineyard Shiraz {Mount
Langi Ghiran, 2015 #275}:
“This wine is made from two vineyards 1162km apart. While the focus of our
winemaking has always been our estate at Mount Langi Ghiran, a discussion arose
between Langi winemaker Dan Buckle and Peppertree winemaker Jim Chatto as to the
virtue of single vineyard verses multi regional blends. Dan and Jim each sent one
another barrel samples and each picked the barrel they wanted for their blend. The
Langi blend comes from our Langi block, while the Hunter component comes from an 80
year old Tallwanta old vineyard. The double vineyard blend combines the floral perfume
and spice of the Grampians, with the structure and savouriness of the Hunter Valley.”
While Mount Langi Ghiran’s wine descriptions do not often explicitly mention the individual
people involved, the frequent use of the personal pronouns ‘I’ and ‘we’, and the mode of
delivery of information via videos and in person (winemaker dinners, events, etc.) are
arguably as powerful in creating a sense of the individuals behind the wine. The videos on the
website add detail and stories to the concise written information. They are all centred on an
individual – the winemaker or viticulturalist in the vineyard, cellar or lab – in simple webcam
style, sending a potent message to the viewer that the place and people are the essence of the
brand. The videos have the feel of a “sneak peek” into the winery, rather than slick
marketing, and this simplicity adds more personal, human qualities to the winery’s image.
The focus on people and place is then picked up by the media, as this newspaper article
{Lewis, 2013 #250} demonstrates:
“At the 2012 Sydney Wine Show a red from the slopes of an isolated granite mountain at
an altitude of 350 metres-plus above sea level and with a mean January temperature of a
mere 18.1 degrees won the trophies for the best wine of the show, the best red and the
best shiraz varietal. It was a brilliant performance by the then-unreleased Mount Langi
Ghiran 2010 Cliff Edge Shiraz from a vineyard established 50 years ago in western
Victoria’s Grampians Region… The wine was made by former chief winemaker Dan
Buckle and assistant winemaker Kate Petering, who has now taken over the Langi
Ghiran top job.”
The article goes on to talk exclusively about the people behind the wine – the stories of
former and current winemakers, founders and owners. The message has been successfully
communicated that the quality of this wine is thanks to the place and people that make it.
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2.2.
Case Study #2: Best’s Great Western
Best’s Great Western is a family owned winery. Planted in 1867, it is one of Australia’s
oldest continuously producing wineries, boasting some of the oldest vines in the world.
Highly regarded for its Shiraz, Best’s also produces a wide range of varietal wines and
blends, including a red and a white wine produced from the nursery block which includes 39
different varieties, some still unclassified.
Two families are central to Best’s identity. From an historical perspective, the founders of the
vineyard, Henry Best and his family, begin the story with a tale of innovation and persistence.
The contemporary story belongs to the Thompson family whose involvement in the Great
Western wine industry goes back more than 140 years. The stories of both families figure
prominently on the website and in promotional material. The emphasis on the legacy of past
owners and winemakers, and the current owners and winemaker is realized by telling the
personal and individual stories of these key people. The thread of people and place can be
traced through the different features of the winery’s image, from a fundamental naming
perspective to the more subtle ways in which their stories are told.
The name Best’s Great Western unequivocally attaches the winery geographically to a place
– the town of Great Western – and to an individual – founder Mr Henry Best. The apostrophe
leaves no doubt that the winery was created by an individual and that the connection is
important. A sense of familiarity with the actual person is created by referring to him by his
first name in published material, for example when quoting from ‘Henry’s journal’. The
familiar tone is found throughout Best’s communication, epitomised in the in-house
publication “Best’s and the story of Great Western Shiraz” written in first person from the
perspective of general manager, Ben Thomson. It reads as a personal story – “When my dad
Viv started making Bin 0 decades ago…” {Best's Great Western, 2015 #270} – with many
references to members of the Thomson family.
Best’s wine names emphasise place with a large proportion of individual wines and
collections referencing the geography. The Concongella Collection is named after the
Concongella Creek that winds is way past Best’s vineyards. Wines in this collection include
the Nursery Block Dry Red, Concongella White, White Gravels Hill Shiraz, all referring to
specific places in the vineyard. Linking the people and the place, wines from the ‘House
Block’ note a particular parcel of vines and allude to an everyday human involvement
through the use of the word ‘house’. The human element is developed further in the form of
wines named after the current owners. The Thomson Family Shiraz sits at the head of the
Icon Range, while the EVT 51 Riesling celebrates Best’s patriarch Viv Thomson (his initials)
and the 51 vintages he has worked there. Even the collaborative Champagne, made with
French producer Huguenot-Tassin, highlights the involvement of Edouard Huguenot,
manager of the family-owned house.
People and place each have their own importance in the labelling of the winery and the
wines, however when both identities are employed together their potency is magnified. This
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is immediately evident in the wine descriptions that Best’s has created for PR and marketing.
The Concongella Range references the local creek in the name and connects it with key
people stating that “Henry Best planted his first vines close to a water source in 1866, the
Concongella Creek” and that “the Thomson Family decided to name a collection of wines
after the area in which the wine is produced from, also drawing inspiration from the soil
structure at Great Western.” {Best's, 2015 #280} In two sentences, the history, people and
place have all been put into context. Again with the flagship wine, people and place are
linked and emphasised: the Thomson Family Shiraz “was created in 1993, to celebrate the
centenary of the Thomson family’s settling in the area of Great Western. A special single
vineyard wine, it was made from the 15 rows of the original 1868 Shiraz vines, planted by
Henry Best, and once referred to as ‘Hermitage’ in Henry’s daily journal.” {Best's, 2015
#281}. Best’s website is also peppered with videos centred around a key person from the
winery explaining an element of wine production.
3. DISCUSSION
Having established that Best’s Great Western and Mount Langi Ghiran emphasise the people
and place involved in the production of their wine, this section discusses possible reasons for
taking that approach. It explores why, in winery communications, so much emphasis is put on
the stories of the people and place when wine is apparently a beverage produced and
consumed for its organoleptic properties. This question will be addressed from an
anthropological perspective exploring producer identity and actions.
These two wineries are quite small in size in the context of the Australian wine industry
where 80% of wine production is owned by 20 companies {Media, 2015 #271}. Their point
of difference from the big companies is that they are small operations with a very precise
geographical location. The individual people and specific place that make each winery are
unique and cannot be replicated, and this forms an integral part of their identity. In interviews
and observations, both wineries were quick to make the distinction between their operation
and the big companies. This distinction follows through in the way they present their stories
to the public. In an increasingly globalised and competitive marketplace, a unique story
centred on a specific geographical place is particularly helpful in building brand equity
{Beverland, 2009 #247}, therefore the reinforcement of a small-scale winery identity by
producers may also influence the way consumers view the brand. While big companies
making multiregional blends may reap the benefits of scale, one advantage for smaller
premium producers is their combination of passionate individuals and connection to a place.
The place for both the wine producers in this study is a rural region of western Victoria. This
poses the question of whether the emphasis on people and place is particularly important for
geographically isolated wine regions. The act of telling the story of the people and place
responsible for producing the wine may be an effort to connect with a consumer who is
unlikely to visit. While wine regions closer to Melbourne, such as the Yarra Valley and the
Mornington Peninsula, have large numbers of visitors, the remoteness of The Grampians
means few consumers experience the winery first hand. Telling the story through published
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material creates a virtual experience of the place and the people. Although it is a virtual
interaction with the winery, this consumer experience can create a connection and loyalty to
the brand {Schmitt, 2009 #254}. For a predominantly urban population, the wine experience,
real and virtual, is becoming more significant as a means to connect with their rural roots and
traditional values {Demossier, 2010 #179}. Both producers aim to express the vineyard in the
wine and it follows that they would wish to explain this to consumers, thereby sending the
wine into the world with some of its production context.
Brands that encourage consumers to create their own stories and meaning are perceived as
more authentic {Beverland, 2009 #247} and the quest for authenticity no doubt underpins the
emphasis on people and place. Mount Langi Ghiran and Best’s emphasis on people and place
clearly illustrate the first of Beverland’s seven ‘habits’ of authentic brands: storytelling,
appearing as artisanal amateurs, sticking to your roots, and loving the doing. Both Best’s and
Mount Langi are creating an image in line with Beverland’s {Beverland, 2009 #247}
research findings that “fine wine consumers judge products seemingly untainted by
commercial concerns as more authentic than mass-market products. Lack of commercial
interest may be demonstrated by overt statements of … commitments to place … and the
passion of winemakers for their products.” The content and method of delivery used by
Best’s and Mount Langi Ghiran to tell their stories reinforce the notion of authenticity for
consumers and in doing so, may enhance the perception of quality and thus prices for their
wines {Spielmann, 2012 #251}.
The association of the people and place of production of a wine with its characteristics is very
much the concept of the terroir. However, it is interesting to note that neither Mount Langi
Ghiran nor Best’s employ the word in their communications. In the case of Best’s, a farming
family from an isolated area, one could argue that the term is culturally irrelevant. While they
are aware of the term and understand it’s meaning, they are not necessarily comfortable with
the word or feel the need to use it. Their identity as wine growers is based on producing
quality wines that respect their place of origin, and Best’s winery and brand identity is an
extension of these values.i The identity of Mount Langi Ghiran is somewhat different as it is
owned by a business group, has a more polished image and appears to be more conscious of
consumer perceptions.ii An awareness that different users of the word terroir have different
understandings of its meaning could be a reason for avoiding it, or perhaps they simply prefer
to avoid using a word that is clearly French. For both wineries the choice not to use the word
terroir seems to be a conscious one, grounding the brands in Australian soil and culture.
i
ii
From interviews, informal conversations and observations at Best’s Great Western, 2010-2015.
From interviews, informal conversations and observations at Mount Langi Ghiran, 2010-2015.
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4. CONCLUSIONS
In exploring these two case studies, it is clear that both wineries emphasise people and place
in their communication with the media and consumers. The emphasis on people and place
helps to create a unique and authentic image for the winery and represents the values of the
wine producers. Arguably, this approach is in part a “means of protecting, preserving and
promoting artisan practices and regional identities” {Trubek, 2008 #268} and suggests that a
terroir-esque concept is being used by these two producers even if the word itself is not
culturally relevant. This preliminary exploration of the emphasis on people and place by two
wineries in The Grampians could be investigated further through more case studies in the
region, comparisons with other regions to investigate the influence of geographical isolation
and tourism, and comparisons with other New and Old World wine producing regions.
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Trubek, A.B. (2008), The taste of place : a cultural journey into terroir, University of
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Diagnosing the Success of Brand New Zealand Wine
Roderick J. Brodie
University of Auckland Business School, New Zealand
[email protected]
Maureen Benson-Rea
University of Auckland Business School, New Zealand
[email protected]
Christopher J. Medlin
[email protected]
Abstract:
Purpose: To investigate the success of the national strategy for the branding of New Zealand
Wine where exports have dramatically increased in the last decade to reach $1.4 billion in
2014.
Design/methodology/approach: The case study design combines primary and secondary data
collection. Our primary data were gathered from face-to-face in-depth interviews with 10
people: two who were managers at New Zealand Winegrowers (NZW) and eight who were
CEOs or senior managers from NZ wineries in a prominent wine region. The secondary data
came from industry reports, NZW Annual reports and the industry website.
Findings: The research demonstrates that the dramatic success of the national strategy for
Brand New Zealand Wine comes from a strategic understanding and intentional
implementation of the facilitating role of collective branding in the industry. The activities
extend beyond developing a distinctive identification and image based on a single dimension,
to branding in processes within the industry network and market networks based on collective
interest that lead to common and shared meanings around the logo ‘Pure Discovery’.
Keywords: Industry brand, brand identification, brand meaning
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1. OVERVIEW
In the last decade there has been a dramatic increase in New Zealand exports of wine and
2014 exports reached NZ$1.4 billion with exports to over 80 countries (NZW, 2014). In this
paper we provide a diagnosis drawing of this success using case evidence. This allows us to
examine the transition of the NZ wine branding from an operational competence based on
identification-image to a dynamic and collective capability for facilitating common meanings
within the stakeholder network. Led by the peak industry body, New Zealand Winegrowers
(NZW), the industry began a journey in 2007 to discover, innovate, improve and diversify in
a strategy and process of building common and shared meanings for Brand New Zealand
Wine. Central to this process is the strategic role national branding plays in aligning industry
relationships.
The illustrative case study design (Siggelkov, 2007) combines primary and secondary data
collection. The primary data were gathered from face-to-face in-depth interviews with 10
people: two who were managers at NZW and eight who were CEOs or senior managers from
NZ wineries in a prominent wine region. The wineries were all small to medium-sized wine
businesses, with annual sales between 100,000 and 4,000,000 litres. Each of the participants
had particular knowledge about the national, regional and firm perspectives on the branding
processes of NZ wines. The participants were asked questions about their marketing,
branding, production and HR strategies and how these align with their interactions with the
local region and the national wine industry. The secondary data came from industry reports,
NZW Annual reports and the industry website (www.nzwine.com).
2. RESEARCH FRAMEWORK
The empirical framework presented in Figure 1 describes the connections between NZW and
its external and industry networks was derived from a theoretical paper Brodie, Benson Rea
and Medlin (2015). Brand New Zealand Wine provides a focus for activities within these
networks. It provides a distinctive trademark and image and a branding process that
facilitates, mediates and realizes common and shared meanings in the networks.
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Figure 1: Framework for Marketing Interactions for Branding of New Zealand Wine
(Brodie et al 2015)
NZW uses its brand to facilitate three groups of marketing activities:
(1)
Marketing interactions between NZW and its external networks (end customers, the
trade, media and other interested parties (government agencies, media, related industries tourism, hospitality, travel etc.).
(2)
Marketing interactions between NZW and its industry network of grape growers,
winemakers, wine marketers and other industry parties marketing company brands.
(3)
Marketing interactions between the external networks and the industry networks
facilitated by Brand New Zealand Wine.
3. TRANSITION OF BRAND NEW ZEALAND WINE
While the country identification and the associated image of “green” production and
sustainability played an important role in shaping the strategy led by NZW, its recent success
involves broader considerations which are more difficult to imitate for lower cost producers
such as Argentina and Chile. In NZW’s new branding activities the past image of “green”
production and sustainability is integrated with the heritage and innovative nature of the
industry. In 2007 NZW adopted a new logo of “Pure Discovery” to replace the previous logo
of “riches of a clean green land”.
The new tagline encompasses NZW’s sustainability but this is only one aspect. The new
value propositions also include the “excitement and clarity of flavour that New Zealand
wines offer”, “the journey the industry has embarked upon, as it continues to discover,
innovate, improve and diversify from the dominant focus on Marlborough Sauvignon Blanc”.
The “green production” is integrated with its heritage and innovation” (NZW, 2007). Also of
note is the visual identity of a vineyard by a lake with mountains in the background has
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disappeared. The new simple identification provides an open platform to develop multiple
meanings around “Pure Discovery”
As a follow up to the rebranding, NZW commissioned a strategic review of the industry
(PwC, 2011). This led NZW to adopt the collective vision of “around the world New Zealand
is renowned for its exceptional wines” with the mission “to create value for its members and
partners”. The NZW strategy focuses explicitly on protecting the established strategic
position and facilitating profitable growth within the industry.
4. DATA ANALYSIS AND DISCUSSION
The research framework for branding of New Zealand wine presented in Figure 1 allows us
to examine NZW’s activities within the refocused branding strategy. Our data, summarized in
the Appendix, involve a combination of internal, external and interactive marketing drawing
on NZW annual reports and face-to-face in-depth interviews.
(1)
Marketing interactions between NZW and its external networks (customers, the trade,
media and other interested parties).
The branding activities undertaken by NZW with the market and other networks include:
relationship building, communicating a commitment to sustainability and quality, and also
focusing on NZ wine’s competitive advantage arising from continuous innovation and
product development. Each of these sets of processes is underpinned by activities that focus
on building the collective meaning of Brand New Zealand Wine. The Appendix presents
examples of narrative data about how NZW co-creates shared and common meanings through
external and internal marketing within market and stakeholder networks.
NZW’s marketing and sustainability activities centre on telling the production sustainability
story and building sustainability credentials to support and grow the Brand New Zealand
Wine to work synergistically with the brand marketing by wine companies within the
industry. As outlined in the NZW 2014 Annual Report (pp. 14-15) NZW has a clear
sustainability mission of “telling the New Zealand sustainability story building on
sustainability credentials”. In 2013-2014 year it hosted four media events with a singular
focus on sustainability with journalists and educators from the UK, China, Canada and USA.
As outlined in its 2014 Annual Report the collective capability that is facilitated by NZW is
broad and integrative and extends the traditional dyadic view of marketing. In addition to the
sustainability mission it includes an advocacy mission “protecting NZW members’ ability to
produce, market and sell competitively”, a research mission “building a knowledge platform
that protects members ability to produce exceptional wines”, and a marketing mission
“developing and supporting the growth of the New Zealand wine brand” where the
understanding of New Zealand wine amongst trade and media is to NZWs activity.
In Table 1 we outline the diversity of this activity. This includes a series of over seventy trade
shows and tastings NZW supported around the world annually. These were partially funded
by the levy paid by all producers to NZW based on the sale of grapes and wine but many
events are “user pays”. Central to this marketing activity is the new logo of “Pure
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Discovery”, which is underpinned by the theme of the previous logo of “the riches of a clean
green land”.
Table 1: NZW Marketing Activities in for 2013-14 year (NZWG annual reports)
Activity
Details
Influencer visitors to New Zealand
77
Trade shows and educational tastings
74 around the world.
Educational activity
112 candidates graduated from four
Advanced Certificate in New Zealand wine
courses in Beijing, Shanghai, Guangzhou and
Hong Kong.
Leveraging
international sporting event America’s Cup yachting regatta in San
which features New Zealand
Francisco Summer 2013.
Social media
‘SauvBlanc Day’ in May 2014 generated 34
million impressions on Twitter.
NZ wine events
Melbourne, Hong Kong, London, Toronto,
New York and a tasting at Twitter HQ in San
Francisco.
Sponsorship of activities
Air New Zealand, O-I New Zealand and JF
Hillebrand.
Support in Export Markets
Guides to Market for 10 key export markets.
(2)
Marketing interactions between NZW and its industry network of grape growers,
winemakers, wine marketers and other industry parties.
The branding activities and programs run by NZW also have an impact on the firms in the
industry network. The excerpts of interviews in the Appendix show a variety of views about
the different issues that arise from specific winemakers and regional organizations’ points of
view. NZW must balance the interests and requirements of many diverse groups. In practice
the operating context for the collective interest is not without its constraints and challenges.
This is especially noteworthy with regard to regional and national strategy alignment.
Different interviewees relate to issues around tensions in interests between individuals and
groups, large and smaller wine companies, different collective interest within subgroups,
frustrations with NZW and the funding of NZW activities.
(3)
Marketing interactions between the external network and the industry networks
facilitated by Brand New Zealand Wine.
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In Figure 2 we illustrate the facilitating role Brand New Zealand Wine plays for a number of
different types of brands that are associated with Brand New Zealand Wine. What is
important to observe, in terms of visual brand identities, is that there is no connection
between the logo for Brand New Zealand Wine and the associated winery brands, event and
varietal brands, regional and sub-regional brands, and the allied brands. The connection
between Brand New Zealand Wine and the related brands comes from branding in processes
that create common and shared meanings around “Pure Discovery”. This is based on the
ability to facilitate collective interest and the common and shared meanings that come from
the discourse about heritage, innovation, sustainability and quality.
Figure 2: Facilitating Role of Brand New Zealand Wine (NZWG annual reports)
Examples in the Appendix also illustrate the importance of partnerships with Air New
Zealand, Tourism New Zealand and New Zealand Trade and Enterprise (NZTE) for building
export markets. Another important process for building shared and common meaning is the
successful participation of NZ wine companies in international wine competitions. An
example of a recent success is the UK based 2015 International Wine Challenge (IWC) where
brands from NZ received 470 medals (www.internationalwinechallenge.com). This event
highlights how the “Pure Discovery” branding strategy and the story of the journey the
industry has embarked upon, as it continues to discover, innovate, improve and diversify, is
achieving collective meaning. Charles Metcalfe, Co-Chairman of the IWC, commented:
“For the first time, New Zealand has scooped more Gold medals for Pinot Noirs than
the traditional masters of the grape in Burgundy, which is a fantastic result for the
country’s relatively young wine industry. New Zealand Sauvignon Blancs continue to
be as good as ever, and it is great to see Kiwi winemakers creating tremendous wines
from more unusual grape varietals. New Zealand winemakers have proven that they
are capable of much more than just creating good Sauvignons and Pinot Noirs. Kiwi
wines are getting better and better.”(www.digitalnewsroom.co.uk/iwc/2015-newzealand May 12 2015).
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When considering the branding of New Zealand wine it is also important to recognize the
supporting role of the government agencies. In the last decade the country branding has been
centred on New Zealand’s ‘100% Pure’ tourism brand. While the focus has been on tourism
there are synergistic effects with other industries such as the wine industry. More recently the
New Zealand trade development organization, NZTE, has launched a major country branding
strategy based on the “New Zealand Story” that complements the wine industry’s ‘Pure
Discovery’ strategy. The initiative is about broadening the perception of New Zealand
internationally, beyond the scenic beauty of the country to include attributes like innovation
and resourcefulness, the unique Māori culture, and the integrity and the welcoming friendly
approach (www.story.newzealand.com).
5.
IMPLICATIONS
Our case study provides a diagnosis of the success of the national strategy for Brand New
Zealand Wine. The success comes from a strategic understanding and intentional
implementation of the facilitating role of branding in the industry. NZW recognizes that
branding activities extend beyond developing a distinctive identification and image based on
a single dimension, to branding in processes within the industry network and market
networks based on collective interest that lead to common and shared meanings around the
logo ‘Pure Discovery’. Here branding involves broader considerations in which a strong
brand identification and image are used to facilitate processes that co-create experience and
common and shared meanings. This entails the alignment of a complex set of industry
relationships, where value is co-created, that contribute to the heritage of Brand New Zealand
Wine and its quality positioning. Within this strategic positioning the concept of
sustainability extends beyond production to a business model based on marketing and
branding.
The key managerial implication of this broadened perspective on branding, focusing on
common and shared meanings, is that interactive communications between buyers and sellers
and other stakeholders play a critical role. In turn, the common and shared meanings may
also facilitate further collective interest. Hence an important managerial consideration is to
understand the governance mechanisms that lead to collaboration based within these value
networks. Also important is to understand how heritage plays an important role in achieving
co-operation (Hira and Benson-Rea, 2013) and leads to collaborative governance to balance
individual and collective interests (Medlin, 2006). The competition between large and small,
local and multinational-owned companies is blended with the realization that the industry’s
success is based on collaboration leading to cohesion and coordination within the value
networks.
Identifying the sources of the differential effect for national wine branding is complex
because of the multitude of relationships that exist between NZW within the industry network
(grape growers, winemakers, wine marketers and other stakeholders), the market network
(customers and the trade) and other stakeholder networks (government agencies, the media
and other stakeholders). A combination of factors drives the value of wine, from the quality
of the grapes to the integrity of the vineyard following sustainable practices, to the
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acceptance and rating by various experts, to the actual taste and use of the wine. All those
factors are negotiated because they are subjective and influenced by a host of people and
external factors, not just the wine itself. But, in this context, an industry-wide collectively
generated and coherent industry marketing brand operates as a stronger point of reference for
potential end-user value than any single firm brand. Further, using more than one brand
symbolically builds consumer trust and commitment. Thus the industry reputation and
identification play an important role for a wine company’s exports. Within this complex of
marketing associations the national brand acts as an umbrella brand which synergistically
augments the value of the individual brand offerings.
REFERENCES
Brodie R. J. Benson-Rea M. Medlin C. (2015) “Branding as a Dynamic Collective
Capability: Integrating Network Meaning with Brand Identification” Working paper,
University of Auckland
Hira, A., and Benson-Rea, M. (2013). “New Zealand: a model for other small industries?”.
Prometheus, 31 4, 387-398.
Medlin, C. J. (2006). “Self and collective interest in business relationships.” Journal of
Business Research, 59, 858-865
NZW, (2007). New Zealand Winegrowers Annual Report.
NZW, (2014). New Zealand Winegrowers Annual Report. Available at: www.nzwine.com.
PwC, (2011). New Zealand Winegrowers: Strategic Review. Auckland.
Siggelkov, N. (2007). “Persuasion with case studies”, Academy of Management Journal, 50
1, 20-24.
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Appendix: Narrative data according to interaction processes between actors in different
networks
Between NZW and the
external networks
Between NZW and the industry network
Relationship building
Balancing interests
“We develop strong relationships
with … influencers, bringing them
to NZ and inspiring them to write
articles or carry out education for
us in their home country. …
supported with high quality
collateral and websites to create
consistent messages … we enhance
strategy development and our
members’ insights with market
information. (NZW, 2014, p. 16)
Individuals and groups
Communicating commitment to
sustainability
“Sustainable Winegrowing NZ
demonstrates
the
country’s
outstanding commitment to securing
a socially responsible, economically
viable and environmentally sound
future. When compared to the rest of
the world, NZ’s country-wide
commitment to sustainability is quite
extraordinary!” (US journalist,
Sandra
Taylor’s
blog:
www.sustainablebizintl.com,
July
2014).
Communicating quality focus
“Behind the scenes the NZ industry
has been focused on exporting wine
of high quality rather than trying to
lure fans with very cheap prices - as
several other countries have done.”
(David Lawrason, winealign.com,
Canada, July 5, 2014).
Communicating
positioning
competitive
“The best NZ wines… are now truly
in a league all their own. And
unlike their European counterparts,
NZ’s best wines display fair price
tags for the level of quality you
get.”
(Eric Arnold, Aftertaste,
USA, April 2, 2014).
“whenever you get a group of wineries together …
they’re a group of individuals … winemakers have
huge egos … some people that are really clicky and
others that are more outliers and outsiders. So, in
terms of an overall social structure … it’s probably like
any family, they have their moments. (CEO, Winery 5,
Interview 2012).
“It’s just a very complex industry… you have to be very
clear about what your objectives are.” (Manager 1,
NZW, Interview 2012).
Firm size
“I was sitting on the Winegrowers board
[discussion]… that you … should only … use the
appellation Marlborough, if it’s bottled in NZ. But, a
lot of the big guys didn’t want to buy into that” (CEO,
Winery 2, Interview 2012).
Diversity
“if you look at all of those groups that have been really
successful, the Gimblett Gravels, the Family of Twelve
and the Complexity thing, that didn’t happen through
NZW but part of the issue there is that NZW can’t be
seen to favour certain groups of the industry” (CEO,
Frustrations
“they have to be very careful about how they use their
funds … from a marketing point of view … they are
constrained … held [back] a little bit by what they can
do.” … “There’s no inspiration, flair … and, I think
that’s largely related to the fact that it’s an industry
body, and the way that the board works, they’re too
involved and they’re too old fashioned.” (CEO, Winery
2, Interview 2012).
Funding is spread and not specific
“if you have a winery that wants to participate in
NZW’s activity, … in [region X] winegrowers’ activity,
… in [sub-region Y] activity …. as opposed to
contributing to one organisation, or two organisations
that can effectively still provide you with those
identities … it’s not that simple in practice. (Manager
Between the external
& industry networks
The
importance
partnerships
of
Air New Zealand
“Partnerships are key to our
strategy … NZW and Air New
Zealand
announced
a
Memorandum
of
Understanding … to actively
promote NZ as a destination
for
wine
tourism
…
committing
to
work
together… to promote NZ
wine in both North America
and Asia.” (NZW, 2014, p.
16)
Tourism NZ
“NZW is working with
Tourism
NZ
…
more
coordinated … leverage … to
gain efficiency and extend
marketing reach … creation
of Wine Tourism … a
designated Special Interest by
Tourism NZ.” (NZW, 2014,
p. 16)
NZ Trade and Enterprise
“partnership with NZ Trade
and Enterprise goes from
strength to strength with
projects focused on China
and
Mainland
Europe
generating strong results this
year and exciting plans
established for the year
ahead.” (NZW, 2014, p. 16)
Building export networks
“they … organize things like
collective
marketing
initiatives …they’ll set the
scene and look at a venue like
Sydney … and get all the
winemakers interested to chip
into a fund and go there as a
kind of collection with one
theme … We went to Sydney
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Communicating innovation and
new product development
1, NZW, Interview 2012).
Regional/national strategy alignment
“To those who truly understand
fine, sublime wine, the reds of NZ
are where the 21st century is at.”
(Dan Berger’s Vintage Experience,
USA, March 20, 2014).
“to better align the regional strategy with national
strategy and gain greater leverage from the funding
that’s going into the region … between the regional
bodies and the national body.” … “the way [region A]
has been or has not been integrated into the national
strategy … we host the international visitors that come
in through the NZW programme. And, we’ve developed
quite a structured and robust system for regional
tastings for those people” (Manager 1, NZW, Interview
2012).
and Melbourne last year… it
happened that we did actually
connect with a distributor …
who looks after both Sydney
and
Melbourne.
(CEO,
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Designing Culturally Specific Wine Packages: The Case of Visual Harmony
Kristina Haberstroh
Christian-Albrechts-University, Germany
[email protected]
Ulrich Orth
Christian-Albrechts-University, Germany
[email protected]
Tatiana Bouzdine-Chameeva
[email protected]
Justin Cohen
Ehrenberg-Bass Institute for Marketing Science,
[email protected]
Armando Corsi
Ehrenberg-Bass Institute for Marketing Science,
[email protected]
Roberta Crouch
[email protected]
Renata De Marchi
De Marchi Indústria e Comércio de Frutas Ltda., Brazil
[email protected]
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Abstract:
Purpose: This study examines how self-construal, a key differentiator among cultures,
impacts how attractive consumers find wine packages high versus low in visual harmony.
Design/methodology/approach: Psychometric data were obtained via an online experiment
from 950 respondents in Australia, Brazil, China, France, Germany, and Italy.
Findings: The results indicate that a person’s self-construal influences attractiveness directly
as well as interactively. Specifically, the positive effect of visual harmony in wine packages,
logos, and typefaces on attractiveness is more pronounced with an interdependent selfconstrual. This effect can be observed regardless of the gender or national background of the
respondents.
Practical implications: Wine marketers can benefit from the findings by better tailoring the
design of entire packages, symbols, and typeface to target audiences
Keywords: Attractiveness; Harmony; Marketing; Self-Construal; Wine Package
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1. INTRODUCTION
Marketing wine across cultures constitutes a challenge (e.g., Aurifeille et al., 2002) for a
diverse group of wine businesses ranging from globally operating multinational corporations
to small wine businesses that cater to culturally varied groups of visitors through tasting
rooms in popular wine regions.
Among the key means for effectively communicating with buyers is the design of a package
(Limon et al., 2009), especially its attractiveness (Orth et al., 2010). Defined as an
aesthetically pleasing subjective experience that is directed toward an object, a design’s
attractiveness increases liking (Cho and Schwarz, 2010), triggers approach behaviors (Orth
and Crouch, 2014), and, ultimately, impacts choice (Creusen and Schoormans, 2005). A key
influencer of a wine package’s attractiveness is its visual harmony which relates positively to
viewer evaluations of attractiveness (Orth and Malkewitz, 2008). Furthermore, a key issue in
successfully marketing wine across cultures lies with identifying what cultural characteristics
drive consumer response to package design (Limon et al., 2009). One particular influence of
such responses is the way people define their self by their separateness from or connections
with social groups (Singelis, 1994), a construct known in the literature as independentinterdependent self construal. Self-construal is not only an important discriminator among
cultures (Trafimow et al., 1991) and nations (Bresnahan et al., 2005), but is also a powerful
predictor of consumer behavior in general (Markus and Kitayama, 1991) and response to
marketing communications in specifics (Ahuvia, 2005). Adopting an interactionist
perspective (Reber et al., 2004), we test the proposition that the attractiveness of wine
packages is grounded in consumers’ processing experience, a function of stimulus properties
(harmony) and individual characteristics (self-construal). We test this prediction on subtle
(logos, typeface) and more obvious marketing visuals (whole packages) to aid marketers in
better tailoring the visual design of wine bottles to cultural target groups.
2.1. Visual harmony influences attractiveness
Gestalt psychology (Koffka, 1935) posits that viewer reactions originate not from any single
visual element, but rather from higher-order generic design factors that are rooted in multiple
elements. Marketing research has established such effects for generic design factors including
the visual harmony of wine packages (Orth and Malkewitz, 2008). Harmony can be defined
as "a congruent pattern or arrangement of parts that combines symmetry and balance"
(Henderson and Cote, 1998, 16), or the degree to which the visual elements of a design form
a coherent, unified pattern (Kumar and Garg, 2010). Key elements of harmonious designs
include symmetry, proportion, balance, roundness, and unity.
On the relationship between harmony and attractiveness, Lin (2013) concludes that harmony
makes a stimulus aesthetically pleasing. Empirical evidence further emphasises that visual
harmony is a key driver of attractiveness for a diverse range of packages of fast-moving
consumer goods (Orth et al., 2010). The reasons for attractiveness as a positive evaluative
outcome of visual harmony are not fully understood (Hekkert and Leder, 2008), and recent
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research suggests that the influence of visual harmony on stimulus attractiveness may not be
as universal as previously thought. Specifically, culture-dependent individual variables, such
as the centrality of visual product aesthetics (Orth et al., 2010), impact how attractive viewers
find stimuli varying in harmony. Relating to an element of the harmony factor, cultural
differences have also been reported in viewer preferences for angular versus rounded shapes
(Zhang et al., 2006). We suggest that these differences may trace back to people's selfconstrual, or the view they hold of themselves as either dependent or independent from
others.
2.2. Culture and the self
Belk (1988) uses the terms “self” for how a person subjectively perceives who she or he is.
According to his theorizing, individuals possess a core self that is expanded to include
additional aspects that then become part of the extended self. This social facet of the self is
central to social identity theory (Tajfel and Turner, 1979), which posits that people define
their self-concepts by their connections with social groups to construct and maintain identity.
When encountering marketing stimuli, consumers reflexively refer to their self-concept,
continuously monitoring and adjusting their behavior and consumption practices (Ahuvia,
2005). Most notably, consumers generally react more positively to brands with characteristics
that are congruent with their concept of self (Sirgy, 1982).
What people believe about the relationship between their self and others has been
conceptionalized as independent-interdependent self-construal (Singelis, 1994). Referring to
how an individual thinks, feels and acts about his or her self in relationship to others, selfconstrual captures the degree to which people see themselves as separate from or connected
with others. People with an independent self-construal hold a view of self that emphasises
their separateness and uniqueness, whereas an interdependent self-construal is associated
with a more relationship-driven self-view that stresses connectedness and interpersonal
relationships (Ahluwalia, 2008). Independent-interdependent self-construal is also an
important discriminator among cultures as it closely relates to the culture’s classification
along the individualism-collectivism dimension (Trafimow et al., 1991). Different than
individualism-collectivism, however, self-construal represents an individual factor that is
influenced by the culture in which individuals are raised, but varies across people and is
central to explaining a person’s perception, evaluation, and behavior (Markus and Kitayama,
1991). Individuals in a collectivist culture construct a self that is far more interdependent than
those constructed in an individualistic culture (Hong et al., 2003).
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2.3. Self-construal and response to visual harmony
Zhang et al. (2006) suggest that self-construal affects aesthetic preferences for angular versus
rounded shapes. This effect is thought to occur because people with an interdependent selfconstrual value harmonious relationships with the environment, whereas people with an
independent self-construal value the free will of individual agency, hereby disregarding
harmony, possibly even favoring conflict.
The proposition that self-construal may impact individual response to harmony in marketing
visuals is rooted in self congruity (Sirgy, 1982) and cognitive consistency theories (Festinger,
1957). Both theories suggest that individuals strive to resolve disagreeing psychological
experiences and maintain cognitive consistency in their beliefs and behaviors. Fundamental
to the notion of self-congruity is that material objects and brands can serve as symbols or
signs that represent socially constructed meanings and effectively reflect the owner’s selfidentity and relationship with others (Schembri et al., 2010). Just as the symbolic properties
of brands allow them to appeal to the self by projecting meaning we expect the visual design
of packages to function in similar ways. Visual harmony in packages may project
associations with agreeableness and peace, whereas a lack of harmony may induce
associations with individuality and conflict. In fact, marketing research and practice provide
evidence in support of this view. For example, the angular (low harmony) design of
Lamborghini cars and interiors appeals to drivers seeking the unique (Winterkorn, 2003),
whereas the soft and flowing curves of Mazda’s (harmonious) Kodo design emerge from the
interdependent culture of Japan.
In summary, visual harmony should appeal more to individuals with an interdependent selfconstrual as harmony and its associations are more congruent with interdependents’ tendency
to seek harmony in their relationships. In contrast, people with an independent self-construal
should respond more positively to visuals low in harmony, in line with their tendency to view
themselves as unique and to stand out from the crowd. Our central hypothesis thus is:
The influence of design harmony on the attractiveness evaluation is moderated by selfconstrual: Interdependent (independent) self-construal enhances (weakens) the positive
influence of visual harmony on attractiveness evaluation.
3. EMPIRICAL STUDY
3.1. Method
The study employed a 3 (marketing visual: logo vs. typeface vs. wine package) x 2 (harmony:
high vs. low) x 6 (country: Australia, Brazil, China, France, Italy, and Germany) mixed
factorial design. Stimuli scoring high versus low in visual harmony were obtained from
previous research on logos (Henderson and Cote, 1998), typefaces (Henderson et al., 2004),
and wine packages (Orth et al. 2010), and were pretested by seventy-eight students (Mage =
23.1 years, 70 percent females) who indicated their impressions of perceived harmony for
one randomly selected stimulus for each of the three types of visuals. Table 1 holds final
stimuli and their pretest scores on harmony.
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TABLE 1
STIMULI AND PRETEST SCORES ON HARMONY.
Stimulus type
Low harmony
High harmony
M = 3.03, SD = 1.50
M = 5.59, SD = 1.04
M = 2.60, SD = 1.41
M = 4.13, SD = 1.60
M = 2.58, SD = 1.12
M = 5.44, SD = 1.03
Logo
Typeface
Package
Notes: on a seven-point semantic differential scale ranging from not at all harmonious (1) to harmonious (7).
Data for the main study were collected in culturally diverse settings to increase variance in
self-construal, as individuals in any culture can have both an independent and interdependent
self-construal but one tends to be dominant (Singelis, 1994). Accordingly, countries were
selected to represent low and high scores, respectively, on Hofstede’s (1983) individualismcollectivism index (IDV). A total of nine hundred and fifty respondents (50 percent between
31 and 50 years, 47 percent females) participated in the main study, with sub-samples
originating in Brazil (N = 66; IDV = 38) and China (N = 354; IDV = 20), representing
collectivist cultures (N = 420), Australia (N = 147, IDV = 90), France (N = 95, IDV = 71),
Germany (N = 136, IDV = 67), and Italy (N = 152, IDV = 76), representing individualistic
cultures (N = 530). Upon logging on to the electronic survey site, participants received brief
instructions and then they proceeded to view digital images of the stimuli. Immediately next
to each stimulus, they indicated their evaluations of harmony (Kumar and Garg, 2010, M =
4.42, SD = 1.60) and attractiveness (Hirschman, 1986, M = 4.20, SD = 1.66). At the end,
participants submitted ratings of self-construal (Singelis, 1994, Mindependent = 5.12, SDindependent
.84, Minterdependent =4.78, SDinterdependent = .91) and indicated demographic information.
3.2. Results
Closely following Dawson (2014), we tested the predicted moderating role of self-construal
by conducting a series of hierarchical regression analyses. The results provide empirical
evidence that an interdependent self-construal moderates the influence of design harmony on
attractiveness across cultures and across marketing visuals: harmony has a significant main
347 | P a g e
effect on attractiveness (b = 1.26, t = 64.09, p < .001) as does an interdependent self-construal
(b = .16, t = 6.93, p < .001). More important, the harmony x interdependent self-construal
interaction term is significant (b = .09, t = 4.41, p < .001). The interaction effect of
independent self-construal and design harmony is not significant (p >.05). To shed further
light on the nature of the significant interaction between design harmony and interdependent
self-construal, results of floodlight analysis (Spiller et al., 2013) over a range of
interdependent self-construal from 1 = strongly disagree to 7 = strongly agree confirms that
harmony has a strong positive effect at high levels of interdependent self-construal, whereas
the effect becomes less pronounced when interdependent self-construal is low (see figure 1).
IGURE 4
FLOODLIGHT ANALYSIS ILLUSTRATION OF THE HARMONY X INTERDEPENDENT
SELF-CONSTRUAL INTERACTION EFFECT.
Important to note, the moderating effect of self-construal remains robust when a more
elaborate model is tested, including additional main and interactive effects. In Model 2,
additional predictors include the dummy variables for culture (collectivism-individualism)
and sex, their two-way interactions with harmony and self-construal, and their three-way
interactions with self-construal and harmony. Culture (b = .33, t = 7.67, p < .001) and sex (b
= -.09, t = -2.22, p = .026) have significant main effects on attractiveness. Additionally,
culture has a significant effect with harmony (b = .08, t = 3.71, p < .001), suggesting that the
positive effect of harmony on attractiveness is enhanced in a collectivist culture. The
interdependent self-construal x harmony interaction effect, however, remains significant and
robust (b = .06, t = 2.44, p = .015), despite the additional predictors in the model. This finding
rules out the possibility that the moderating effect of self-construal is rooted in, or dependent
on, a person’s collectivism or sex. Taken together, the findings provide the desired evidence
that an individual’s interdependent self-construal interacts with visuals’ harmony to influence
evaluation of a design’s attractiveness across different cultures.
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4. DISCUSSION
Our study examined how a person's self-construal, a cultural discriminator, impacts the effect
of wine marketing visuals, specifically, their harmony, on consumer evaluation of
attractiveness across cultural settings. Our results provide strong evidence that the view
individuals hold of self, emphasising either their separateness from or connectedness with
others, impacts their evaluation of relatively benign marketing visuals. This finding has
several important implications.
First, we extend research on the configural-elemental distinction in wine package design. The
finding that the influence of visual harmony on viewer evaluation of attractiveness depends
on a person’s self-construal corroborates reports that examining configural design properties
can provide better insights into consumer response than elemental approaches (Kumar and
Garg, 2010) because human aesthetic appreciation of visual artifacts is a holistic experience
(Hekkert, 2006).
Second, our study extends the emerging stream of research that has adopted an interactionist
perspective on consumer response to marketing visuals. Our finding that consumers evaluate
wine packages as more attractive when high design harmony coincides with a more
interdependent self-construal corroborates that accounting for interaction effects between
generic properties of marketing visuals and viewer characteristics increases the explanatory
power over stimulus-only or viewer-only approaches.
From a managerial perspective, wine marketers may benefit from our findings by better
tailoring package designs to target audiences varying in self-concepts, a proxy for ethnic,
country, and national markets. Viewing self-construal as a discriminator among cultures
(Trafimow et al., 1991), wine marketers could employ our findings to tailor the visual design
of entire packages, symbols, and typefaces to cultural contexts in order to make offers more
appealing. Given that growth in consumption of most consumer goods now and in the future
will not be led by traditional western markets, but rather by emerging economies likely to be
dominated by a more interdependent level of self-construal amongst consumers (e.g., China
has become the eighth largest wine consumer market in the world and the demand in Asia is
continuing to grow; Camillo, 2010), the findings of this research can be also be employed to
invent new, and adapt existing, wine packages accordingly in order to maximize their
attractiveness to those consumers. Moreover, given that self-construal can be viewed as a
temporary state that varies across people (Markus and Kitayama, 1991) but can also be
activated (Mandel, 2003), marketers could make use of our findings by priming either
independent or interdependent self-construals (e.g., to make use of singular (plural) firstperson pronouns to prime independence (interdependence); Gardner et al., 1999) to make
them more consistent with the level of harmony inherent to their marketing visuals.
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How to discriminate fun and exploratory labels from typical labels?
Francois Durrieu
Kedge Business School, France
[email protected]
Renaud Lunardo
[email protected]
Abstract:
Purpose: Past research has examined aesthetic design in a context of experiential products.
However, only a few studies have examined this variable in the domain of wine packaging.
Therefore, nothing is known as to whether aesthetic can be considered a relevant way of
differentiation. Hence and precisely, this paper seeks to explore the differences between fun,
exploratory and typical packagings and their impact on the price of the wine.
Design/Methodology/Approach: A qualitative study is conducted with 31 people. In order to
investigate the extent and the reasons why fun, exploratory and typical packagings are
considered different, participants were asked to select from a sample of 100 labels 2 labels of
each packaging category and to explain why they see the selected labels as representative of
their category.
Findings: The results highlight the design as a way to differentiate wine packagings and to set
up a clearer positioning in terms of price. Fun and exploratory packaging induce aesthetic
reactions while typicality elicits more security-oriented responses.
Practical Implications: From a managerial point of view, design elements and price can be
associated for each packaging type, especially for fun and exploratory ones. Their description
are more precise.
Research limitations/implications: This study has a limitation in that the typical wine is not
precisely defined by a specific group: wine is more or less typical. Future research could
compare basic wines with exploratory and fun ones, and generalize the study to another
experiential product.
Keywords: Packaging, typicality, aesthetic design
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1. Introduction
The marketing literature emphasizes the consumer's tendency to use cues such as price to
judge product quality (Kardes, Posavac, and Cronley, 2004; Labro et al., 2007). This process
might be particularly relevant for experiential products, those such as wines (Nelson, 1970)
for which people are not necessarily fully informed as to their quality before consuming
them.
Among the specific attributes used by consumers as cues to shape their preferences and
perceptions of quality and price, the design of the label has probably been the cue that has
received the widest attention from academics (Combris et al, 2009; Mueller et al., 2010). To
this regard, research on design typicality of the label or packaging (Landwehr et al., 2013)
has established that consumers prefer more typical (vs. atypical) designs (Celhay and
Trinquecoste, 2011; Veryzer and Hutchinson, 1998). The typicality refers “the degree of
which the product is representative of the category” (Veryzer and Hutchinson, 1998), here of
the category of Bordeaux wine design packaging. Also, research shows that the greater the
distortion with the product category stereotype design is, the less consumers exhibit favorable
responses toward the product (Karnal et al., 2014). What these results suggest is that
consumers evaluate bottle designs in a holistic manner (Orth and Malkewitz, 2008)).
Precisely, what matters most lies in the aesthetic dimension of the packaging, with aesthetic
packaging leading to higher evaluation. Such aesthetic packaging here refers to one that is
holistically beautiful, original and prototypical while standardized packaging is functional,
practical and prototypical (Reimann et al., 2010). These authors show that aesthetic
packagings are preferred over more standardized ones, especially when consumers are
unfamiliar with the brand. For instance, any figure or identifier on the label that is unusual
may increase the consumer’s preference (Labroo and al., 2008), making typicality an
important dimension of aesthetic packaging (Landwehr et al., 2013; Sangwon and Rajani
Ganesh, 2013).
In addition to label design, wine origin represents another cue that consumers use to shape
packaging evaluations (Perrouty et al., 2006; Orth et al., 2005). For instance, and with regard
not specifically to wine but rather to products, research shows that product origin enhances
subjective fluency and subsequent product evaluations (Sangwon and al., 2009). Different
levels of origin can be distinguished, from the more global product to the more local. With
respect to wine, origin can be global and thus related to country, or more local and related to
a particular region. However, other packagings highlight the name of the winery to make
their wine be seen as a local and private brand. Such wines are produced for consumers who
like to discover or explore different wines, those that are not too global or typical but rather
more local. Such wines might be preferred by consumers that are more attracted by and place
more value on such local wines, and exhibit a high level of motivation for searching
information (Suri and Thakor, 2013). However, the literature has not identified whether
labels that are designed as typical and global shape different reactions than labels that are
designed as more local and requiring more exploratory behavior.
Several studies have examined the link between aesthetic design and price (Orth et al., 2010;
Homburg et al., 2014). Orth et al. (2010) consider the attractiveness as a mediator between
aesthetic design elements and price. This result is consistent with the fact that aesthetic
design generates more favorable responses when the attractiveness of the packaging is high
(Landwehr et al., 2012). However, only a few research have focused on the relationship
between typicality and price (Landwehr et al., 2013; Sangwon and Rajani Ganesh, 2013).
Firms can implement price-skimming strategy, but without implementing price reductions
354 | P a g e
(Landwehr et al., 2013) as they want to have a valuable differentiation and clear positioning
from typical design.
Considering the aforementioned roles of typicality and origin, we distinguish labels that
differ in their typicality and local-and exploratory-related properties to explore how they offer
potential differentiation. More precisely, we investigate how three distinct types of labels,
which can either be seen as fun, typical or local and exploratory-related, affect consumers'
evaluations and price.
2. Method
The research question refers to the reasons that make typical, exploratory and fun labels
relevant cues that consumers use to evaluate and pay for wine. Hence, it seems necessary to
understand how "fun" and "exploration" labels are perceived, and to know how consumers
differentiate them from typical wine from Bordeaux. This typology of labelling comes from
an internal document of wine Bordeaux professional syndicate (Chateau 2010).
Given this goal, a qualitative an exploratory study was conducted. Data collection took place
in Bordeaux. In order to investigate the extent and the reasons why fun, exploratory and
typical packagings are considered different, participants (n= 31, most being female and aged
between 19 and 55, with 7 experts inside the sample) were asked to select from a sample of
100 labels 2 labels of each packaging category and to explain why they see the selected labels
as representative of their category. Finally, participants inferred the price for each label. In
total, 186 labels were selected by participants.
A content analysis was used, as well as methods previously accepted in marketing research
on design. Particularly, the main design dimensions was used to evaluate each label that
respondents considered as representative of a category. These dimensions were the following:
elaborate, harmony, abstract, weighted, contrasted, original, typical, pleasing, engaging and
reassuring (Henderson et al., 2004; Orth and Malkewitz, 2008). The prototipicality and,
visual unity (Veyzer and Hutchinson, 1998) of these labels was also checked.
3. Results and discussion
The most frequently selected labels for each category were the following. At least, the label
are selected by 3 people. Five labels were defined as fun (Label 22 for example), 3 labels as
exploratory (Label 42 for example) and 4 labels as typical (Label 73 for example).
Figure 1. Examples of fun, exploratory and typical labels
As shown in Table 1, eight themes have been ascertained: "classical", "pleasure", "original",
"weighted” “humor", “sober”, “stylish” and atypical”. Classicism (35.5%) sober appearance
or weighted (51.6%), humor (17.2%), originality (29%) and the pleasure induced by the label
(26.9%) remain important. For label’s characteristics, five themes are revealed “information”,
“château”, “image”, “color”, drawing” and “millesime”. If the information and the vintage
355 | P a g e
(41.9%) are attributes that describe all the labels, some use the Castle (35.5%) or an image
(39.8%) and others drawings (34.4%). In contrast color is an attribute that is surprisingly
never used.
Table 1. Label impressions and characteristics
Label impressions
No answer
Classical
Pleasure
Original
Weighted
Humor
Sober
Stylish
Atypical
Label characteristics
No answer
Information
Château
Image
Color
Drawing
Millesime
Nb. cit.
14
33
25
27
27
16
21
15
17
Nb. cit.
18
39
33
37
26
32
16
Frequency.
15.1%
35.5%
26.9%
29.0%
29.0%
17.2%
22.6%
16.1%
18.3%
Frequency.
19.4%
41.9%
35.5%
39.8%
28.0%
34.4%
17.2%
However, there are strong differences between each label type when it labels ‘impressions
(chi2 = 111.17, ddl = 30, p=0.000) and labels’ characteristics (chi2 = 77.69, ddl = 18,
p=0.000) are considered. A factorial correspondence analysis was used to emphasize the
differences between label’s type and label impressions. For the first axis, typical label with
sober and weighted is the opposite of fun’s label and atypical and for the second axis is
defined by exploratory’s label, stylish, pleasure and originality. Fun label is strongly
associated to atypical and humor, exploratory label to stylish, original and pleasure and
typical label to sober and weighted. The last one could be defined as classical because all the
informations and the image of the castle contribute to the sober style of the label.
356 | P a g e
Axe 2 (19.46%)
humor
typical
weighted
fun
sober
Axe 1 (80.53%)
atypical
stylish
original
exploratory
pleasure
Figure 5: How to differentiate labels from evaluations.
A second factorial correspondence analysis was used to highlight the differences between
label types and label characteristics. Regarding the first axis, typical labels that present a
'château' is depicted as the opposite of fun labels, that are characterized by the presence of a
drawing. The second axis refers to exploratory labels, those that present information and
color (Figure 2).
Figure 6: Label types and characteristics
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Humor and atypical appearance through the presence of a drawing relate to an image of fun
wine, while stylish effect through searching for information elicits an image of exploratory
wine. In contrast, classicism and sober aspect with an image of the Castle refers to a typical
image of the Bordeaux wine. Below are presented labels’ evaluation by label’s type.
Tableau 3: Label evaluations by label’s type
Global
Fun
Exploratory
Typical
Pleasing
61.30%
67.7
80.7
35.5
Original
57.00%
90.3
74.2
6.5
Harmony
55.90%
25.8
80.7
61.3
Elaborate
47.30%
38.7
54.8
48.4
Reassuring
38.70%
9.7
35.5
71
Weighted
36.60%
41.9
22.6
45.2
Typical
36.60%
3.2
19.4
87.1
Abstract
28.00%
41.9
41.9
Contrasted
28.00%
35.5
32.1
16.1
Engaging
25.80%
41.9
22.6
12.9
Tableau 4: Price, Typicality and Visual unicity by label’s type
Price
Typicality
Visual Unicity
Mean
11.80
2.95
3.64
Global
Standard
deviation
11.04
1.53
0.89
Mean
7.32
1.55
3.32
Fun
Standard
deviation
2.49
0.62
0.86
Exploratory
Mean
Standard
deviation
10.31
4.73
2.45
0.99
3.87
0.86
Typical
Mean
Standard
deviation
17.76
16.92
4.71
0.46
3.73
0.89
The majority of people evaluate labels as being harmonious (55.9%), original (57%), pleasant
(61.3%) and elaborate (47.3%). On the other hand, they consider the labels are less
contrasting (28%), less abstract (28%) and less engaging (25.8%). If you compare evaluations
by label’s type, fun label is defined as weighted (41.9%), contrasted (35.5%), engaging
(41.9%) and even more (original 90%), exploratory label as elaborate (58.4%), in harmony
(80.7%), original (74.2%) and pleasing (80.7%) and finally typical label as typical (87.1)
reassuring (71%) and much less weighted label (45.2%). But there is a large variance of
responses (typicality 1.53) on what is typical for consumers whereas for visual unity, people
are much more agreed. For this sample, the average of prices that reflect these labels is 11.8
euros with high standard deviation. Now we present differences between the three labels.
Packaging Evaluation
Price
Fun
Weighted
Original
Constrated
Engaging
7.32 with standard deviation
(2.49)
Exploratory
Harmony
Pleasing
Elaborate
Original
Visual unity
10.31 with standard
deviation (4.73)
Typical
Typicality
Reassuring
Weighted
17.76 with standard
deviation (16.92)
Tableau 5: label’s evaluation and price by label’s type
When consumers face wine choice, they need more information to decide for an exploratory
wine than for typical wine. They want to reduce the risk to make a wrong choice and to make
a better diagnostic. Local wine as exploratory wine are preferred when you compare with
358 | P a g e
global and typical wine (Zhang and Khare, 2009). Typical packagings emphasize country
and/or region as the place of origin of their wines, making them global and having similar
properties for all consumers worldwide (Zhang and Khare, 2009). We can consider
exploratory as wine of “petites propriétés”. Different levels of origin can be distinguished
from the more global product to the more local one. However, other packagings highlight the
name of the winery to make their wine be seen as a local and private brand. Such wines are
produced for consumers who like to discover or explore different wines, those that are not too
global or typical but rather more local. Such wines might be preferred by consumers that are
more attracted by and place more value on such local wines, and exhibit a high level of
motivation for searching information (Suri and Thakor 2013). The fun and exploratory
packaging release aesthetic responses as originality, humor, stylish and pleasure, perhaps
more affective reactions for fun wine than for exploratory one. We can distinguish aesthetic
packaging design (exploratory and fun) from standardized packaging design (typical) in
terms of consumer choice (Reiman et al., 2010). Fun is the most atypical design packaging
and release more strong response as excitement or humor and they have contrasting design
packaging with a drawing of sheep for example (Orth and Malkewitz, 2008). Also,
exploratory wine could be associated with a moderate typicality and enhance a long term
attractiveness for the consumer. In short term conditions, typical design could be chosen. It is
not the case with atypical and typical design packaging (Karnal et al., 2014). If people are
more agreed concerning fun and exploratory price than for typical wines, the positioning for
typical wines is not clear. If we consider low price (less than 3 euros) for typical basic wine,
the consumer considers fun and exploration wine are much more value for money. So, we
have clearer positioning for fun and exploratory wines and a better segmentation (basic, fun
and exploration). Normally, more the design is atypical, more the price is expensive
(Landwher et al., 2013). It is not the case for the wine and especially that from Bordeaux. We
can explain that with “primeur” system that decides the price of the wine after tasting (Ali
and Nauges, 2007) without design evaluation. This system have an impact for all the wine.
The primeur price is a quality signal in terms of expectations for the consumers and the wine
in primeur system are typical for Bordeaux. Another explanation could be the several
classifications that decide the price of all the wines in the region of Bordeaux. Also, more the
wine is typical, more the price is high.
4. Conclusions, Limitations and Implications
This paper highlights the importance of design elements, especially in regard to experiential
products segmentation. The results highlight how design elements contribute to differentiate
exploratory or fun wines from typical wine. We can define exploratory wine as “vins de
petites propriété”, fun as accessible and uninhibited wine and typical as the classic wine of
the region. The price associated to each packaging present a clear segmentation between fun
and exploratory wine and it is not the case for typical wine.
From a managerial point of view, the fun label is based on humor and atypical appearance. In
addition, it requires drawing. Consumers evaluate the fun as original, abstract and attractive
packaging. But the wines must be lower than 9 euros and it is the most accessible for a novice
consumer. Exploratory label is on stylish appearance, originality and pleasure. In addition, it
requires putting forward information including the vintage to show the origin and specificity
of the wine and seeks to use color to differentiate them. Consumers evaluate the packaging as
harmonious, abstract and pleasing with a strong visual unity. Consumers want to discover a
local wine not drunk by a lot of people. The price is less 14 euros. The typical label is based
on the classicism and his sober style. In addition, it requires the signals of château.
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Consumers evaluate the typical packaging as reassuring. But the wines will be higher than 15
euros.
The main limitation of this study lies in that the respondents did not precisely define what
typical wine is. If we have a chateau, it is considered as a typical wine. So all the wines in
Bordeaux with this kind of definition are typical but we have a large range of price. To make
the results more accurate, future researchers could compare basic wines (low price) with fun
and exploratory wines. Also we could replicate this study with another experiential product to
examine if an exploratory packaging can be specified, and to compare its perceived price
with its real price (because “what you see may not be what you get”; Mueller et al., 2010).
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Designing Labels to Make Consumers Willing to Pay More for Wines:
The Effects of Typical, Fun and Local Front Labels on Consumers'
Willingness to Pay for Bordeaux Wines
Renaud Lunardo
Tel +33 5 56 84 55 19
[email protected]
Francois Durrieu
[email protected]
Abstract:
Purpose: While previous research has examined labels as cues that shape consumers' quality
perceptions, the effects of label design on consumer's willingness to pay (WTP) remains
surprisingly unaddressed. This paper thus seeks to investigate how the three main types of
labels used for Bordeaux bottles (namely typical, fun and local) affect WTP.
Design/Methodology/Approach: An experiment is conducted with 200 people. Then, analyses
of variance and structural equation models are used to describe the respective influence of
each label type.
Findings: The results highlight the positive effect of typical labels and the negative effects of
local labels. Of importance, the structural equation models help understanding the process
whereby the characteristics of each label type affects WTP. The model shows that symmetry
perceptions, fluency and reinsurance are variables of importance for typical labels, while fun
labels exert their influence through flourish perceptions and engagement. A striking result
regarding local labels relates to the lack of effect of wine evaluation on WTP.
Practical Implications: From a managerial point of view, the results highlight how designing
labels that are seen as typical can increase fluency and WTP. Results also emphasize the
detrimental effects of local labels, suggesting that designing labels that induce the feeling that
the wine is locally produced may be damageable.
Research limitations/implications: This study focuses on Bordeaux wines and it remains to be
examined whether the results would replicate with wines from other countries and with
different characteristics.
Keywords: Labels, design, WTP
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1. INTRODUCTION
Price is often used as a cue to judge product quality (Rao and Monroe 1989). However,
when it comes to the price a consumer is willing to pay, the reversed process might exist, and
quality cues may be used to infer willingness to pay (WTP). This process might be
particularly relevant for experiential products, those such as wines (Nelson 1970) for which
people are not necessarily fully informed as to their quality. In that case, product quality can
only be appraised once consumers have engaged in the act of consumption. In the specific
context of wine where consumers might usually pay before having tasted the product, it thus
might be particularly difficult for consumers to appraise the price they are willing to pay for a
given wine, and consumers may thus rely on cues to appraise the quality of the wine and
subsequently the price they are willing to pay for it.
Among the specific cues that shape consumers' quality perceptions, the design of the label
has probably been the cue that has received the widest attention (Boudreaux and Palmer
2007; Combris et al 2009; Orth et al., 2010). What results suggest is that consumers evaluate
bottle designs in a holistic manner (Orth and Malkewitz, 2008), with most consumers
processing the label as a whole rather than relying on specific attributes. Considering this
holistic process, the investigation of the influence of products and labels design has often
been conducted under the lens of typicality, leading to the consensual notion that consumers
prefer more typical (vs. atypical) designs (Landwehr and al. 2013; Veryzer and Hutchinson
1998).
In addition to label design, another cues that is used to shape packaging evaluations – and
still unexamined in relation with WTP – refers to wine origin. Such cues represents an
important one for consumers, as highlighted by the creation in 1935 by the National Institute
of Controlled Appellations of the appellation of origin, a tag that wineries put on their labels
to indicate the geographic pedigree of their wines. This appellation of origin is seen as a sign
of quality and an assurance to consumers of quality standards. As shown by Lunardo (2009),
the origin of the wine can contribute to its perceived authenticity. The wine origin might also
play a role in wine evaluation; for instance, and with regards not specifically to wine but
rather to products, research shows that product origin enhances subjective fluency and
subsequent product evaluations (Sangwon and al.2009). Different origins can be
distinguished, from the more global product to the more local. Specifically, with respect to
wine, origin can be global and thus related to country, or more local and related to a
particular region (Suri and Thakor 2013).
Hence, in this paper, we aim to investigate how three distinct types of labels, which can
either be seen as highly or lowly typical (that is, fun) or local affect consumers' evaluations of
and subsequently their willingness to pay (WTP) for wines. We also identify the mechanisms
underlying these effects. Precisely, the mechanisms that are here hypothesized to mediate the
effects of label type exposure on evaluations and WTP are subjective fluency and sensory
evaluations. As the first refers to the ease with which an incoming stimulus is processed
(Reber et al., 1998), it might be the case that as typicality increases, consumers process the
wine label with different higher fluency, thus increasing subsequent sensory evaluations and
WTP.
In what follows, we adopt an inductive approach to end up with a model of the influence
of label design attributes on consumer’s responses. The experiment used in this research is
363 | P a g e
described and the results are presented. These results suggest some important implications for
wine producers and retailers that are then discussed.
2. METHOD
2.1 Procedure and design
2.1.1 Stimulus selection and procedure
A pretest (n = 31, age ranging from 19 to 55) was conducted to select the stimuli used for the
experiment. Participants were asked to 1/ select a total of six labels – two for each of the
typical, fun and local types – in a sample of 100 labels that were collected on the web, and 2/
explain the reasons why they considered the selected labels as either typical, fun or local. The
labels that were the most frequently considered as representative of a category were retained
for the experiment and used as a stimulus in a survey. This survey was developed and
administered via Qualtrics (n = 200, U.S. sample, age ranging from 18 to 60, 70% between
30 and 60).
2.1.2 Measures.
As in previous research on WTP (Bagchi and Cheema 2013; Ein-Gar and Levontin, 2013,
Krishna, 199), participants were asked after being exposed to a specific label to rate on a
single-item measure their WTP by asking them " What price in US Dollars would you be
willing to pay for a 75 cl bottle of this wine ?" (Franke et al., 2009).
The flourish, size and symmetry of the labels were measured trough the scale used by Orth
and Malkewitz (2008). Then, participants indicated their subjective experience of fluency by
rating on a three-item scale adapted from Fang et al. (2007) the ease with which they could
process the label (7-point scale: 1 = very difficult to understand/imagine/process; 7 = very
easy to understand/imagine/ process). This scale was chosen since it has already been used in
previous research (Torelli et al., 2012) and proved reliable (α = .80). Sensory evaluations
were appraised though the 7-item scale already used by Nerlove (1995), Hughson and Boakes
(2001) and Lowengart (2010). Finally, feelings of engagement and reinsurance were
respectively measured with the three items "Cold vs. Warm", "Unemotional vs. Emotional",
and "Uninteresting vs. Interesting", and the two items "Informal vs. Formal" and "Not calm
vs. Calm" (Henderson et al., 2004). All the scales were measured on 7-point scales and were
all reliable, with Jöreskog Rho ranging from .78 to .91(Hair et al., 2005).
3. RESULTS
3.1 The Differences between Typical, Fun and Local Front Labels
In order to examine the effects of the different types of label, analyses of variance
(ANOVAs) were conducted with label type as the criterion and the factorial score of every
other variable involved in the model as the dependent variables (Table 1).
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Table 1. Factorial Means of Constructs According to Label Types
Flourish
Size
Symmetry
Fluency
Sensory evaluation
Engagement
Reinsurance
WTP
Typical
.261
184
.457
.372
.245
.139
.437
.361
Label types
Fun
-.121
.042
-.195
-.114
.034
.034
-.481
-.493
Local
-.148
-.235
-.276
-.269
-.220
-.179
.036
.008
F
2.879
2.450
9.587
6.409
3.000
1.397
13.108
7.067
Sig.
.059
.090
.000
.002
.053
.250
.000
.001
Results show that the means of all variables (FFlourish = 2.88, p = .059; FSize = 2.45, p = .090;
FSymmetry = 9.58, p = .000; FFluency = 6.41, p = .002; FSensory Ebal. = 3.00, p = .053; FRinsurance =
13.11, p = .000; FWTP = 7.07, p = .001 ) except that of size (p = .090) and engagement (p =
.250) significantly vary according to the labels (Table 1). Specifically, what results indicate is
that typical labels are those that are associated with the highest mean of flourish (M = .261),
size (M = .184), symmetry (M = .457), fluency (M = .372), sensory evaluation (M = .245),
reinsurance (M = .437), and, importantly, WTP (M = 361). Surprisingly, local labels – and
not fun labels – are those that lead to the lowest mean o of flourish (M = -.148), size (M = .235), symmetry (M = -.276), fluency (M = -.269) and sensory evaluation (M = -.220).
3.2 The Structural Models of the Effects of Front Wine Labels
Two structural equation models were then developed. The first model aimed to depict the
overall influence of front wine labels. The model that exhibited the best fit (χ²= 13.83 (n.s);
GFI = .97; AGFI = .91; CFI = .98; SRMR = .04; RMSEA = .03) was that presenting flourish
perception and symmetry as the antecedents of fluency, these variables positively affecting
sensory evaluation through engagement and reinsurance. Sensory evaluation then positively
affects WTP. Of note, size is included as a variable that covaries with flourish perceptions
and symmetry (Figure 1).
Figure 1. The Model Resulting from the Path Analysis
In addition to this model, following the procedure developed by Zhao, Lynch and Chen
(2010), mediation analyses were conducted to test the mediating effect of fluency, feelings of
engagement and reassurance and sensory evaluation. These analyses were conducted using
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Preacher and Hayes’ (2008) macro and 5000 bootstrapped samples. As shown by the 95%
confidence intervals of the indirect effects excluding zero (Table 2), the results show the
mediating effects of fluency, engagement, reassurance and sensory evaluation.
The second structural model aimed to investigate the extent to which the preceding model
may explain the effects of each type of front label. A multigroup analysis was thus conducted
to test how the typical, fun and local labels differ in their effects. The significant difference
between the Chi-squares of the configural invariance model and the model with unequal
parameters (Δχ² = 94.72, p < .000) indicates that the three types of labels differ in their
effects.
Table 2. Tests of Mediating Effects of Fluency, Sensory Evaluation and Feelings of
Engagement and Reassurance
IV
M
DV
IVM
MDV
IVDV
Indirect effect
CI
Sig.
Flourish
Se. Ev.
WTP
.43***
.37***
.15
.16**
[.08; .30] Yes
Flourish
Fluency Sens. Ev.
.46***
.28***
.39***
.13**
[.06; .23] Yes
Flourish
Fluency
Engag.
.46***
.35***
.21***
[.13; .33] Yes
Flourish
Fluency
Reinsur.
.51***
.14*
.24***
[.15; .37] Yes
Flourish
Engag.
Sens. Ev.
.56***
.22**
.40***
.12*
[.02: .26] Yes
Symmetry
Reinsur.
WTP
.49***
.33**
.15
.16**
[.05: .31] Yes
Symmetry
Fluency Sens. Ev.
.44***
.29***
.38***
.13**
[.06; .23] Yes
Symmetry
Fluency
Engag.
.58***
.15
.26***
[.16; .38] Yes
Symmetry
Fluency
Reinsur.
.51***
.16*
.22***
[.14; .35] Yes
Fluency
Engag.
Sens. Ev.
.62***
.25**
.31***
.16*
[.02: .31] Yes
Fluency
Sens. Ev.
WTP
.49***
.37***
.08
.18**
[.07: .33] Yes
Fluency
Reinsur.
WTP
.53***
.38**
.07
.20**
[.09: .35] Yes
Note: In columns, IV: Independent Variable; M: Mediator; DV: Dependent Variable; CI : Confidence interval of
the indirect effect; Sig.: Significance of the mediating effect of M; ***: p < .001; **: p < .01; * p < .05
Table 2 shows that while typical labels makes fluency results from symmetry (β = .53), fun
labels makes it result from flourish perception (β = .43). However, and still regarding fun
labels, such fluency does not lead to more reinsurance (β = n.s.); when reinsurance occurs,
this variable positively affects wine evaluation and WTP. The process whereby fun labels
lead to higher WTP is thus one that involves flourish perception, fluency, engagement,
reassurance and evaluation. The difference between fun labels and typical and local labels is
that for those latter labels WTP is not affected by reassurance, which is needed only in the
case of fun labels.
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Table 3. The Distinct Effects of Labels Attributes for Typical, Fun and Local Labels
Relationships
Flourish  Fluency
Size  Fluency
Symmetry  Fluency
Flourish  Engagement
Flourish  Wine evaluation
Fluency  Engagement
Fluency  Reinsurance
Engagement  Reinsurance
Engagement  Wine
evaluation
Reinsurance  Wine
evaluation
Wine evaluation WTP
R² Fluency
R² Engaging
R² Reassuring
R² Wine evaluation
R² WTP
Labels
Fun
0.43
n.s.
n.s.
0.39
n.s.
0.50
n.s.
0.50
0.43
Overall
.44
n.s.
.35
.44
.30
.44
.31
n.s.
.39
Typical
n.s.
n.s.
0.53
0.67
n.s.
0.22
0.39
n.s.
0.51
Local
n.s.
n.s.
0.58
0.39
n.s.
0.50
0.36
0.35
0.30
.20
n.s.
0.41
n.s.
.26
.28
.54
.42
.39
.24
0.46
0.27
0.65
0.46
0.45
0.14
0.46
0.27
0.65
0.46
0.56
0.44
n.s.
0.28
0.47
0.39
0.23
n.s.
4. GENERAL DISCUSSION
This research investigated how label design can shape consumers' responses and WTP.
Through an experiment manipulating three distinct and widespread types of labels, this
research adds to the literature by making three contributions. First, we demonstrate that mere
exposure to a specific label type can influence WTP and we identify the type of label that
leads to the highest WTP. Second, we develop a model that explains the influence of and the
process whereby labels design attributes influence WTP. Third and finally, through a
multigroup analysis, we distinguish for each type of label the specific process whereby each
type of wine label affects WTP through fluency, subsequent sensory evaluations of wine and
perceptions of engagement and reinsurance.
4.1 Theoretical Implications
Our first theoretical contribution lies in the main effects of mere exposure to the different
label types. Considering that typical labels have received the most positive scores on all
variables, our research supports the notion derived from the theory of the preference for
prototype (Campbell and Goodstein, 2001; Hekkert and Van Wieringen, 1990) and arguing
that typicality often concludes that the more a product design is perceived as typical of its
category, the more it will be appreciated and will produce strong purchase intent (Celhay and
Trinquecoste 2014).
The second contribution refers to the process whereby fun labels affect WTP. We show that,
as opposed to typical labels, fluency – which surprisingly results from finding the label
flourish– does not affect reinsurance, but also that when such a feeling occurs, it strongly
affects WTP.
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The third contribution of this research relates to the surprising negative effects of local labels.
Such labels that emphasize the local origin and the producer of the wine is rated as the
significantly most negative on five out of seven variables. Of important and more
specifically, local labels are those that lead to the lowest degree of fluency and sensory
evaluation.
4.2 Managerial implications for wine producers and retailers
The first important practical recommendation that can be suggested relates to the mere labels
exposure effects. Our results indicate that typical labels are those that lead to the highest
WTP, while fun labels are those that induce the lowest. If one considers that WTP is a
variable of primary importance, it thus may be suggested for wine producers and marketers of
the wine industry to design labels in a way that makes them perceived as typical. As shown
by the overall and multigroups analyses, as well as by the test of the mediating effects, the
symmetry that consumers perceive from typical labels induce a sense of fluency, which leads
to feelings of engagement that increase the evaluation of wine and WTP. Another
recommendation lies in the wide negative effects of local labels. Hence, wine producers may
gain in designing labels that do not induce the perception that the wine is purely local, but
rather may design labels that are seen as either typical or fun. The third recommendation lies
in the differential paths observed for the distinct label types. Wine producers that aim to
increase their prices and thus WTP may consider the process whereby each label type can
increase WTP.
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Old wine in new bottles? The impact of information on
the acceptance of innovative wine packaging
Lucas Nesselhauf
Heilbronn University, Germany
[email protected]
Johannes Deker
University of Mannheim, Germany
[email protected]
Ruth Fleuchaus
Heilbronn University, Germany
[email protected]
Abstract:
Purpose: This paper suggests that consumer education in the form of information can
effectively overcome adoption barriers to new and innovative wine packagings. This
effectiveness depends both on the degree in packaging innovation and the level of consumer
involvement.
Design/methodology/approach: We conducted an online experiment with a sample of
German consumers to analyse the perception of consumers for innovative packagings. The
experiment featured three different packaging options: bottles with screw cap closures, bagin-box, and StackWine. For each packaging form, there was a treatment group with additional
information about the packaging and a reference group without this information. To test our
hypothesis, we applied ANOVAs and t-tests. We carried out a moderated regression analysis
to examine the effect of involvement in combination with information on intention to buy.
Findings: The results revealed that low involvement consumers react positively to additional
information about the benefits of a new packaging. For highly involved consumers, however,
the effect of information is not significant. Furthermore, the analysis showed that consumers
with low involvement mainly buy wine in supermarkets.
Practical implications: Information about new packaging forms should be presented in places
where consumers with low involvement buy wine, such as supermarkets. These customers
can be influenced by the additional information about the innovative packaging.
Keywords: Packaging, innovation, consumer behaviour, involvement, customer education
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1. INTRODUCTION
Are bottles outdated? Nowadays, wine comes in many different shapes and sizes: Bottles with
corks, screw caps or stoppers, larger containers like bag-in-box and Tetra Pak®, and the single
serving packagings like StackWine or cans. The wine market is changing in terms of
packaging. Producers break with traditions and introduce new packaging forms (Barber and
Almanza, 2006). Bag-in-box sales have steadily increased over the last few years (Santini et
al., 2007) and the International Organisation of Vine and Wine (2013) has proposed to the
World Customs Organisation to change the custom identification of containers between 2 and
10 litres, which demonstrates the importance of this type of packaging.
However, innovative packagings face the same barriers as every other innovation (Atkin et
al., 2006). Despite this fact, the adoption of innovative packaging attracted little attention in
previous research. Especially radically innovative packaging forms like StackWine have not
been addressed in the realm of customer acceptance of innovations. Therefore, the aim of this
paper is to shed light on the acceptance of radical packaging innovations in the wine market.
In particular, we examine the effect of customer education as well as the level of product
involvement on the acceptance of new packaging forms.
Packaging is one of the last chances to persuade a customer to choose one item over another
(McDaniel and Baker, 1977). Therefore, it can significantly influence customers’ purchase
decisions. Rigaux-Bricmont (1982) shows that packaging is a powerful way to differentiate
products from competitors. Especially food packaging greatly influences the purchase
decisions. In addition to the important role of protecting and keeping perishable goods fresh
and consumable, packaging helps customers find the right product (Wells et al., 2007). Orth
& Malkewitz (2008) define five holistic packaging design prototypes, each of which consists
of a specific set of design elements and factors that trigger certain design impressions in
customers’ minds. Since wine is a very complex product whose quality cannot be adequately
assessed prior to its purchase or consumption, customers rely on extrinsic cues such as the
packaging and the information displayed on the packaging (Atkin and Newton, 2012;
Sherman and Tuten, 2011). First, there is empirical evidence that shows that extrinsic cues
like label design, type of closure, region of origin, and price can influence the purchase
decision and even the post-purchase evaluation of quality significantly (Atkin and Newton,
2012; Atkin et al., 2006; Barber and Almanza, 2006; Celhay and Passebois, 2011; Sherman
and Tuten, 2011; Veale, 2008). One part of the packaging is particularly interesting for the
wine marketing research: the closure (e.g. Murray and Lockshin, 1997). Research shows that
customer education, such as information about an innovation, can alter the preference of
different types of closure. Customers showed higher preferences for synthetic cork closures
after reading an informative article about this new type of closure (Murray and Lockshin,
1997).
Second, besides information about an innovation, several other factors influence the adoption
process of innovations. For example, extrinsic cues that reduce the risks associated with the
innovation (e.g. warranties) can also foster adoption of innovations (Bearden and Shimp,
1982). Additionally, the timing of marketing activities is crucial for their efficacy (Delre et
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al., 2007), and especially during the launch phase, traditional advertising activities can highly
impact the adoption (Narayanan et al., 2005). Ram & Sheth (1989) show that innovation
resistance occurs in every product category and solely depends on the degree of discontinuity.
Therefore, products with a high level of discontinuity face stronger adoption barriers than
those with lower levels of discontinuity. However, these low innovative products can face
strong resistance, particularly if a conflict with the customers’ belief structure occurs (Ram
and Sheth, 1989). Atkin et al. (2006) use the concept of resistant innovation to analyse the
adoption of screw cap closures for wine bottles in New Zealand, the United States, and
Australia. The authors define the screw cap closure as a low-tech discontinuous innovation.
Lastly, research also shows that the concept of involvement has a major influence on
consumer behaviour in innovation adoption. Zaichkowsky (1988) introduces product
involvement as the individual’s perceived relevance of a product or product category. High
involvement consumers evaluate extrinsic product cues differently than low involvement
consumers. Involvement also leads to different consideration of extrinsic cues like country of
origin of the brand; low involvement consumers tend to pay more attention to this cue than
highly involved consumers (Prendergast et al., 2010). There is a multitude of research about
wine and involvement showing that the level of involvement has a significant influence on
the consideration and understanding of different extrinsic and intrinsic cues (e.g. Hollebeek
and Brodie, 2009; Madureira and Nunes, 2013; Spielmann, 2012).
In conclusion, the degree of radicalness of an innovation, the available information about an
innovation, and the customers’ involvement in the product category influence the acceptance
of an innovations. Thus, the relationships among these constructs is of crucial importance for
the development of new packagings and the presumed adoption of such innovations.
3. HYPOTHESIS DEVELOPMENT
The degree of radicalness reflects the degree of discontinuity of an innovation. A more
radical innovation deviates more from the reference product. Information, in this case, is an
unbiased list of facts about the benefits of the packaging innovation, which is specific to each
packaging innovation. The involvement stands for the customer’s perceived relevance of
wine. Acceptance represents the customers’ willingness to buy wine in this specific
packaging form. Figure 7 visualises the presumed relationships between the four constructs.
Figure 7: Visualisation of the Hypotheses
Degree of Radicalness
H1
Acceptance
H2
Information
Involvement
H3
Based on these definitions and the assumptions derived from the literature review, more
radical packagings face stronger customer acceptance barriers. Thus, we propose the
following hypothesis:
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H1:
The customer acceptance of the packaging innovation is inversely related to the
degree of radicalness of package design.
Moreover, customer education in form of information about the beneficial features of the
packaging is expected to be positive for every packaging variant. Thus, we propose the
following hypothesis:
Information about the innovative packaging’s beneficial features enhances customer
acceptance of the packaging.
Lastly, customer involvement also has an impact on the acceptance of the packaging
innovation. Because customer involvement implies that customers have knowledge about
wine, the impact of information about the packaging might be different for different levels of
customer involvement. Due to the lower level of knowledge, low involvement customers
might be more open to information about new packaging forms. Thus, we propose the
following:
H3: The positive effect of information about the packaging on the customer acceptance is
greater for customers with low involvement than for those with high involvement.
H2:
4. METHOD
Figure 8: Packaging Variants
Packaging
Bottle with Screw Cap (SC)
Bag-in-box (BiB)
StackWine (SW)
©
Dr
in
kS
tac
k.c
o
m
Visualisation
Four single serving
0.75 litre bottle with
3 litre bag-in-box
Description
plastic glasses
screw cap closure
(total 0.75 litre)
Degree of Radicalness
Low
Medium
High
As setup for this study, we use a 3 (degree of radicalness) x 2 (information presentation)
factorial between-subjects design in an online experiment. The degree of radicalness is
reflected by the three different wine packing variants that differ in the way customers
consume the wine (see Figure 8). Hence, they refer to different degrees of radicalness and
imply different consequences for the adoption process. Since the bottle with cork closure is
the best known wine packaging in Germany, we use it as reference. Therefore, the bottle
with a screw cap closure (SC) represents the least radical innovation. The process of
consuming wine is mainly identical, the only difference is the opening of the bottle referring
374 | P a g e
to the definition of Atkin et al. (2006). In line with this definition, for bag-in-box wines
(BiB), the consumption process is rather different: There is no glass bottle and the container
is significantly larger. The wine is still consumed out of a usual glass. Therefore, it can be
argued that the degree of radicalness is on a medium level. StackWine (SW) represents the
highest degree of radicalness, because the form of the container is completely different and
no glasses are necessary to consume the wine. The presentation of the packaging form was
integrated in the online experiment in the form of a series of pictures or a video
(StackWine).
Table 1: Wine Product Involvement by Hirche & Bruwer (2014)
 I have good general knowledge about wine.
 Every now and then I visit a wine seminar.
 Other people often ask me advice regarding wine.  Sometimes, when drinking wine, I like the
intellectual challenge of complex tastes.
 Wine offers me relaxation and fun when life’s
 I am or would consider getting a member in a wine
pressures build up.
club.
 I take particular pleasure from wine.
 I regularly attend wine events / festivals.
 I very much enjoy spending time in a wine shop.  Every now and then I participate at a wine tasting.
The information texts about the benefits of the packaging forms included features like the
possibility to open the bottle or container without a tool, to close the bottle again, or to
prevent oxidation. The intention to buy was used as measurement of acceptance of the
packaging (“I would buy wine in this packaging”, 7-point Likert scale). Involvement was
measured using the ten items wine product involvement construct (7-point Likert scale)
developed by Hirche & Bruwer (2014), see Table 1. Furthermore, participants’ demographic
data and the place of purchase (supermarket, wine shop, online wine shop, vineyard cellar
door, vineyard online) were obtained.
5. DATA ANALYSIS AND RESULTS
First, we conducted a pilot study with 15 participants to test our manipulations and the
wording of the items in translation. In the main online experiment, a total of 427 participants
were randomly assigned to the six conditions of a 3 (packaging: SC, BiB, SW) x 2
(information about benefits: yes vs. no) factorial between-subjects design. The resulting cell
sizes ranged from 63 to 75. The participants were incentivized with a prize to take part in the
online experiment; we approached most of the participants in wine related Facebook groups.
The participants’ mean age is 30 years, 49.9% of the participants are male and 48.7% are
female. Overall, 51.5% of the respondents stated to be students. The distribution of these
demographic characteristics among the six groups is even as an ANOVA for age, gender and
job showed no significant differences (age: df = 5; F = 1.450; p = 0.205; gender: df = 5; F =
0.357; p = 0.877; and job: df = 5; F = 0.376; p = 0:865).
To test the reliability and unidimensionality of the construct ‘wine product involvement’, we
carried out an exploratory factor analysis, which extracted one factor, and calculated the
Cronbach’s α which is 0.931.
To analyse H1, we carried out a one-way ANOVA in combination with planned contrasts.
The ANOVA shows a significant effect of the packaging on the intention to buy, F(2.424) =
173.24; p < 0.05; ω = 0.67. The three planned contrasts, see Table 2, show that the
participants’ acceptance of screw caps is significantly higher than for bag-in-box and
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StackWine. The difference of the acceptance between bag-in-box and StackWine is not
significant.
Table 2: Planned Contrasts
Contrast
Mean Difference
Std. Error
t
df
Sig. (2-tailed)
r
SC > BiB
3.22
0.202
15.92
261.336
0.000
0.70
SC > SW
3.51
0.198
17.79
248.805
0.000
0.75
BiB > SW
0.29
0.230
1.28
279.984
0.201
0.08
Overall, the results of the contrast tests show that only SC > BiB and SC > SW. Because BiB
= SW, H1 is only partly supported. There are statistically significant differences among the
three packagings regarding the respondents’ intention to buy. The assumed order with a
decreasing acceptance from screw cap to StackWine, however, cannot be identified. The
acceptances for bag-in-box and StackWine are on the same level, the acceptance for screw
cap closures is significantly higher.
Table 3: T-Tests of the Effect of Information on Acceptance
Levene’s Test
t-test
Test
F
Sig.
t
df
Sig. (2-tailed)
r
SC1 > SC0
0.031
0.859
0.328
143
0.372
0.03
BiB1 > BiB0
2.088
0.151
0.731
145
0.233
0.06
SW1 > SW0
0.002
0.967
0.173
133
0.432
0.01
Next, to examine the positive effects of information about the packaging on the customer
acceptance of the packaging proposed in H2, we carried out three individual independent
sample t-tests. Each t-test compares the means of the two different groups within one
packaging: with information (SC1, BiB1, SW1) and without information (SC0, BiB0, SW0).
Table 3 shows the results of the three t-tests and the corresponding Levene’s tests. These
results state that there is no significant difference (α = 0.05) between the groups with
information about the features of the packaging and the groups without that information.
Therefore, there is no mere effect of information on intention to buy. Hence, H2 is not
supported by the data.
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Table 4: Results of the Moderated Regression Analysis
Predictor
B
Std. Error
t
Sig.
Constant
b0
2.816
0.310
9.808
0.000
Information (X)
b1
0.978
0.445
2.196
0.029
Involvement (M)
b2
-0.021
0.074
-0.289
0.773
Interaction (XM)
b3
-0.217
0.107
-2.031
0.043
Packaging (C)
b4
3.334
0.180
18.521
0.000
r of the model: 0.678
r change due to interaction: 0.073
Significance of r change: 0.043
Equation: Y = 2.816 + 0.978X – 0.021M – 0.217XM + 3:334C
To analyse the moderating effect of involvement in H3, we performed a moderated regression
analysis using the data of all 427 respondents. The binary variable X represents whether there
was information about the features (1) or not (0). Because the respondents do not differentiate
between the intentions to buy wine in the packaging bag-in-box or StackWine, these two
types of packaging were summarized in one cluster (‘more radical packaging’). The screw
cap closure stands for the ‘less radical packaging’. The bivariate covariate C represents these
clusters (0 = ‘more radical’; 1 = ‘less radical’). The moderator M shows the involvement
(range: 1 to 7). The intention to buy is the dependent variable Y (range: 1 to 7).
Figure 9: Visual Representation of the Moderated Regression Analysis
Interaction Effect
Conditional Effect as Function of Involvement
Notes: The covariate C is set to its sample mean 0.340.
Using IBM SPSS 22 and Hayes’ plug-in PROCESS, the floodlight analysis shows that
information has an effect on intention to buy for customers with low levels of involvement.
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Table 4 shows the results of the moderated regression analysis. The r of the model is 0.678
and 0.073 can be assigned to the inclusion of the interaction effect. The results of the
floodlight analysis in Figure 9 show that the effect of information on the intention to buy is
significant (α = 0.05) for respondents with involvement levels lower than 2.45. Within the
sample, 22.5% of the respondents have an involvement score lower than 2.45. Since the
interaction effect of information and involvement is only significant for low levels of
involvement, hypothesis H3 is supported.
Additionally, we examined the different shopping places of customers with the different
levels of wine product involvement. The results in Figure 10 show that low involvement
customers prefer to buy wine in supermarkets. Customers with an involvement level of 4 or
higher mostly buy wine at the vineyards or in wine shops and also use online shops more
often.
Figure 10: Place of Purchase by Level of Wine Product Involvement
Percentage of positive answers per level of wine product involvement. Multiple answers possible. Numbers
‘(67)’ represent the number of respondents in this class of involvement.
Sparse research on the acceptance of innovative packagings exists. In this study we focus on
innovative wine packaging and the influence of customer education and involvement. To
begin with, we find that the differences in the acceptance of the packaging forms indicate that
the respondents differentiate between two levels of radicalness. The respondents show the
same level of acceptance for StackWine and bag-in-box, but a significantly higher acceptance
for the bottle with screw cap closure. Therefore, the general assumption that a lower degree
of radicalness correlates with a higher acceptance of the packaging can be supported. Testing
hypothesis H2 revealed that the information about the beneficial features of a packaging does
not enhance the acceptance among customers in general. The results of testing hypothesis H3
show why information does not influence the acceptance in general: The acceptance is
moderated by the level of wine product involvement. The data shows that low involvement
customers react positively on information about the beneficial features of the packaging. For
customers with higher levels of involvement, the information has no significant influence on
the acceptance.
The analysis of the purchase places shows that low involvement wine customers prefer to buy
wine in supermarkets. Since information about the packaging affects this group of customers
the most, the information should be present in supermarkets. These customers with lower
378 | P a g e
levels of involvement can be convinced of the benefits a new packaging can offer. Highly and
medium involved customers prefer the direct contact, consulting and the product range a
dedicated wine shop or a shop on the premises of a winery can provide. These customers
might be open to new packagings if the sales personnel can describe the benefits directly.
This, however, would need further experiments with this specific question.
Marketing activities regarding the new packaging form combined with a higher availability of
the specific packaging would boost the acceptance. In particular, a well-known brand which
represents high quality wines could be very successful by introducing entry level wines in the
bag-in-box packaging. The brand name creates trust and the availability of a variety of wines
in bag-in-boxes could have mere-exposure effect on customers. As soon as the packaging is
not perceived as risky either through the brand, the familiarity or the combination of those,
customers will buy wine in these packagings as well.
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What does your wine label mean to consumers? A semiotic approach
Franck Celhay
Montpellier Business School, MRM - Montpellier Recherche Management, France
[email protected]
Hervé Remaud
KEDGE Business School, France;
[email protected]
Abstract:
Purpose: A large body of research has shown that the packaging’s graphic design influences
consumers’ perception of a product. Many marketing scholars and researchers acknowledged
that a package graphic design is a critical tool for managers to communicate about the brands
they manage. In the meantime, very little is known about how the visual component of a
packaging does produce the desired meanings among consumers. Using a semiotic approach,
this study aims to investigate this link using wine labels as a field of investigation.
Design/methodology/approach: In this study, a content and semiotic analysis of Bordeaux
wines visual codes is conducted. Four labels, representative of the Bordeaux wine category,
are tested on a sample of 932 French respondents using a free word association task. A
correspondences factorial analysis is also conducted to identify the themes’ association with
the different labels.
Findings: We confirm that using a semiotic perspective can anticipate most of the ideas'
associations that a package graphic design is likely to produce in consumers' mind. More
importantly, semiotics allow to understand which visual attribute is likely to produce which
idea association and why.
Practical implications: Conducting a semiotic study seems to be a reliable tool for managers
to help them to design their packaging according to the positioning and brand's meanings they
seek to communicate to their clients.
Keywords: Packaging, design, semiotics, communication, wine label
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1. INTRODUCTION
Many authors have shown that the visual aspect of a product (especially food products)
contributes to its perception (Ares et al., 2011; Hagtvedt, 2011; Henderson et al., 2004; Orth
& Malkewitz, 2008; Pantin Sohier, 2009; Mizutani et al., 2012; Raz et al., 2008; Rebollar et
al., 2012; Sester et al., 2013; Velasco et al., 2014; Westerman et al., 2013). Consequently,
any modification of the package design would affect the brand’s personality and quality
perception, and ultimately, consumers' willingness to buy the brand (Mueller & Szolnoki,
2010; Orth & Malkewitz, 2008; Pantin Sohier, 2009; Westerman et al., 2013). Based on this
background, marketers use the package design to communicate about their brands
(Underwood, 2003). Several researchers have explored the theoretical bases of such a
phenomenon (Ares et al., 2011; Henderson et al., 2004; Orth & Malkewitz, 2008), but very
little is known about the relationship between the characteristics of the visual design and
consumers’ understanding and perception of these wine labels’ design. In this study, we aim
to respond to the following question: what do wine labels mean to consumers? In other
words, we investigate and show that a semiotic approach is a relevant and effective approach
to understand how the visual component of a packaging does produce the desired meanings
among consumers. Three major methodological approaches have been used so far to
understand this link. If two of these approaches are interesting to overview, we will focus in
this paper on the semiotic approach to explain how wine labels are perceived.
2. LITERATURE OVERVIEW
2.1. From experimental to holistic design
Manipulating some visual attributes of the packaging (colors, typeface, etc) was often used
to measure their impact on perceived quality or intent of purchase (Velasco et al., 2014;
Mueller and Remaud, 2013). However, such experiments are unable to reflect the multiple
interactions that determinate the global visual aspect of a packaging. Yet, as highlighted by
Orth and Malkewitz (2008), consumers look at a packaging as a whole, and on the basis of
this holistic perception, they establish specific beliefs with regard to a product.
Other researchers argue that there is no theory in the marketing field that provides concrete
guidelines for defining a package (or logo) visual aspect according to the messages a
manager wants to communicate about his/her brand (Henderson et al., 2004; Orth &
Malkewitz, 2008). These researchers have proposed a two-step empirical approach to
identify holistic designs (e.g., massive, contrasting, natural, delicate, etc.) and then test them
with consumers. The advantage of this approach is its realism as it allows researchers and
marketers to test the perception of real stimuli (real packages or logos). However, this
approach also possesses a few limits: no theory supporting the empirical findings; difficulty
to fully explain them; lack of stability in the observed relationships between holistic designs
types and the dimensions of the brand personality. These limits suggest that the same visual
attributes could generate different meanings across different product categories.
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2.2. The semiotic approach
More recently, a few researchers started to use the conceptual and theoretical frameworks of
the semiotic field to better understand how the visual aspect of a logo, brand, or packaging
generates meanings for consumers (Ares et al., 2011; Piqueras-Fizman et al., 2011).
Semiotic can be defined as “the theory which describes and analyses the mechanism by
means of which a sign system produces meaning” (Ares et al., 2011; Kehret-Ward, 1988;
Piqueras-Fiszman et al. 2011). Having this theoretical background in mind, Ares et al.
(2011) and Piqueras-Fizman et al. (2011) have developed a three-step approach:
1. Run a content analysis of packages available on the market to identify the visual
codes of a specific product category.
2. Decode the meanings usually associated with these codes through a semiotic study.
3. Test the visual codes previously identified with consumers using a free word
association task.
Semiotic studies appear to be a relevant tool for marketers to guide them in the design of
their package and logo. This approach presents several advantages, including taking into
consideration the package visual attributes separately (i.e. colors, typography, forms,
illustrations, materials…) and the overall aspect of the package (i.e. overall level of
complexity or novelty of the visual, level of congruency among the different visual
attributes, equilibrium of the composition, hierarchy among the different elements etc…).
However, this approach suffers a lack of replication. The two articles of Ares et al. (2011)
and Piqueras Fiszman et al (2011) use the same experiment materials and analyze the visual
codes of the same category (yogurt packages). On the top of it, one of the visual codes used
in the experiment come from a well-known brand (Activia of Danone), potentially impacting
and conditioning the respondent pre-existing awareness and knowledge of that specific
brand positioning.
This study aims to contribute to this body of knowledge by extending the external validity of
the results of Ares et al. (2011) and Piqueras-Fizman et al. (2011) as well as to add to the
existing body of knowledge new results in relation to this new product category: wine.
3.1. Identification of the Bordeaux wines visual codes
To facilitate the research protocol and narrow down the research field, we focused on wine
labels of the Bordeaux region. The first step of the study was about identifying the visual
codes used on these wine labels. A selection of 117 Bordeaux wine labels have been
analyzed using a content analysis method. Two coders independently coded the labels using
a grid of observation (composition and layout, color, typography, illustrations themes,
styles, etc…). The inter-judge reliability was measured by calculating the inter-judge rate of
agreement and Cohen’s kappa coefficient. The inter-judge agreement was 91% and Cohen’s
kappa was 0.87, which indicates great concordance among the judges.
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3.2. Semiotic analysis of the Bordeaux wines visual codes
Following the codification of the labels, a semiotic study was conducted to interpret what
these labels refer to. We used the binary model of signs of Ferdinand de Saussure (1917).
According to Saussure, signs can be divided into two facets: the signifier and the signified
(Crow, 2010; Celhay et al. 2015). The “signifier” (or the expression plane) is the physical
manifestation of the sign. It can be a sound (for a verbal sign) or an image (for a visual sign).
The “signified” (or the content plane) is the meaning that is attached to the signifier. From a
semiotic perspective, a package design is a combination of several signifiers that
communicate specific signifieds (i.e. meanings) to the consumer.
3.3. Designing the wine labels to be tested
Based on the content analysis results, a graphic designer created four typical Bordeaux wine
labels. All labels include the same informational content but each presents some individual
characteristics regarding its visual attributes (see Figure 1).
Figure 1: Typical Bordeaux wine labels used for the free word association task
Bottle 1
Bottle 2
Bottle 3
Bottle 4
3.4. Semiotic analysis of the wine labels to be tested; test of the labels
A semiotic analysis of each bottle was conducted in order to anticipate how the perception of
each label was likely to differ according to its individual specificities.
Respondents were recruited using the client list of a Bordeaux wine merchant. Request to
participate was sent by e-mail, inviting participants to forward the invitation to people they
know (snowball effect). To encourage participation and participants to complete the full
survey, a competition in which a few bottles of wine would be offered to randomly selected
participants has been organized. People stating that they don’t consume wine were excluded
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of the study. Finally, 932 people fully completed the survey. The average respondent is 43
years old, and 59% of the participants are male.
The survey was conducted online using Qualtrics software. The four bottles of wine were
tested based on a within-subject experiment design. First, the four bottles were presented all
together to the respondents with the following sentence: "Here are four bottles of wine from
Bordeaux in which the brand (chateau) name has been removed for the purpose of the study.
Look at them carefully before continuing the survey." We wanted each respondent to clearly
see and compare these bottles before answering the questions. Such a comparison also occurs
in a real environment when consumers face many more labels and bottles to choose from.
Then, each bottle was presented individually to the interviewees in a random order and
respondents were asked to evaluate each of these four bottles using a free-word-association
technique: "what does this bottle of wine evoke to you? Please write down all words, idea
associations, emotions, or images that come to your mind when looking at these bottles"
(Ares et al., 2011).
3.5. Data analysis
In order to analyze all idea associations generated by each label, a lexical content analysis
was conducted following Celhay et al. (2015) approach. Because of the number of responses
to analyze (4 * 932 = 3,728), Sphinx Quali lexical analysis software was used. Two
researchers independently conducted this categorization and then compared their theme
dictionary to obtain a consensus. Finally, when the main themes were identified, the software
recoded the responses obtained from the free word association into close-ended variables in
relation to the first 50 themes of the corpus. It enabled to calculate the frequency of
occurrence of each theme for each label and for all the respondents (see Table 1) and then to
conduct a correspondences factorial analysis indicating what themes were most associated
with the different labels (see Figure 2).
4. RESULTS: Perception of the labels using the free word association task
Table 1 presents the results of the free word association task for each label. The lexical
content analysis allows identifying the ten (restricted here to the 5 most important ones)
themes which have been most frequently associated by the respondents to the different
labels.
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Table 1. First 5 lexical themes associated to each label
#
Ancient
296
Outdated
183
Heavy
179
Tradition
120
Wine of quality
103
Modern
222
Elegant
164
Sober
152
Simple
151
Wine of quality
84
Freq.
Stimuli
31.8
19.6
19.2
12.9
Bottle 3
Themes
11.1
23.8
17.6
16.3
16.2
9.0
Bottle 4
Bottle 2
Bottle 1
Stimuli
Themes
#
Freq.
Simple
163
Small château
141
15.1
Classic
140
15.0
Sober
116
12.4
Wine of quality
82
8.8
Classic
174
Tradition
128
13.7
Ancient
115
12.3
Terroir
106
11.4
Wine of quality
100
10.7
17.5
18.7
Label 1 evokes themes such as ancient, outdated, tradition and classicism. This was expected
according to the ochre background, enlightened frames, centred layout, etching style of
illustrations and gothic typeface. The “heavy” association was also expected according to
the overall complex and fully “loaded” aspect of the label.
Label 2 evokes themes such as modern, elegant, sober, and simple. This was expected
according to the overall simple aspect of the label: pristine white background with black text
and subtle touches of gold and the use of a thin type.
Label 3 evokes themes such as simple, sober. This was expected according to the pristine
white background with black text and the use of a thin formal script typeface for the brand
name. The “small château” association was also expected according to the use of lower-case
letter for the brand and region name and the absence of gold. The “classic” association was
expected according to the layout and composition of the label as well as the use of etching as
style of illustration.
Label 4 evokes themes such as classic, tradition, ancient. This was expected according to the
use of a yellowing background, to the layout and composition of the label as well as the use
of etching as style of illustration. Label 4 also evokes themes such as terroir, based on the
use of brown colors, the irregular outline label style and the illustration theme which
highlight more the vineyards than the château.
Thus, it appears that some ideas associations (classic, wine of quality) are generated by the
four labels while other are more specific. This appears as a logical result as the four labels
have common visual codes (layout and composition). This can also be explained with the
overall reputation a wine region already generates in people’s mind. This general reputation
(here wine of quality) acts as a general ‘landscape’ for the wine being offered to the
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consumers. However, whatever the way a region is generally perceived, the label of each
bottle still convey a distinctive message and meaning to the consumers that the region will
not overshadow.
The correspondence analysis factorial map (Figure 2) allows us to better outline what the
associations of ideas are with the perception of the four labels.
The first axis explains 62% of the total delivered information and represents two polarities:
modern versus ancient. Thus, it appears that the labels (labels 1 and 4) on the right side of the
map could be differentiated as being perceived as more ancient and traditional and the labels
on the left side (labels 2 and 3) as being perceived as more modern. The second axis,
explaining 28% of the total delivered information, represents two sides of the perceived price
and prestige of the wine: small, modest and affordable châteaux on one side; prestigious,
high-end and expensive châteaux on the other side. Thus it appears that the labels on the
bottom of the map (labels 3 and 4) are perceived as being more affordable and the labels on
the top of the map are perceived as being more expensive (labels 1 and 2). This however
doesn’t imply that the label 3 and 4 are perceived as being low quality wines as the theme
“wine of quality” is associated to all the labels and appears at the centre of the map.
5. CONCLUSIONS
In line with previous researches, our study confirms the idea that different packaging
(including signifiers and signified) convey different messages and specific positioning for
wine products. Our study also supports the relevance of using a semiotic approach to better
understand consumers’ perception of signifiers and signified in the case of wine product.
From a managerial perspective, our findings give relevant insights to wine producers
wanting to position their wine labels in a way that delivers value to the consumers:

Label 1 style and positioning is old fashioned, trying to encapsulate the historical
aspect of the wine, but fail to be attractive (pretentious, heavy, bad, square) for most
consumers.
 Label 2 style and positioning generates greater beliefs and perceptions: it’s modern
(elegant, design, young) and at the same time, perceived as ultra premium (referring
to the 1855 classification, expensive). If the objective of many producers is about a
premiumisation of their production, they would certainly consider this style of label.
 Label 3 is the archetype of the entry level wine: simple, modest, basic, light, cheap.
 In addition to label two, label 4 is the other label generating positive beliefs and
perceptions to the consumers: authentic, terroir, classic, tradition, like, etc.
More than designing their labels based on their own style and taste, wine producers and wine
marketers would gain to understand the meaning that specific font, color, shape, etc, generate
in people’s mind. Such an understanding of the signifiers and signified would help these
producers and marketers to design wine labels in line with the positioning they want to
achieve in line with consumers’ expectations with these wines.
In a very competitive environment such as the one facing wine producers today, a better
understanding of the signifiers and signified valued by consumers, would allow the producers
to deliver greater value to their clients, assuming these producers understand and
acknowledge what meanings their labels convey to the consumers.
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Figure 2. Correspondence analysis factorial map
High end / Expensive
Ancient
Modern
Basic / cheap
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Fantasy themes on wine labels: A good idea for practitioners?
David A. Jaud
Massey University, New Zealand
[email protected]
Valentyna Melnyk
Massey University, New Zealand
[email protected]
Jan R. Landwehr
Goethe University Frankfurt, Germany
[email protected])
Abstract:
Purpose - This paper investigates the effects of fantasy wine labels on purchase intentions.
While the use of fantasy themes (i.e., a fiction genre using imaginative elements and unreal
creatures) is increasing in many product categories, yet it is unclear how consumers actually
react to fantasy themes on wine labels.
Design/methodology/approach - Two on-line experiments were designed (using betweensubjects design), and samples from New Zealand (Study 1: 237 participants) and USA
(Study 2: 241 participants) were collected.
Findings - This research builds on the principle of hedonic dominance (Chitturi et al.,
2007). The results of this research suggest that fantasy (vs. no-fantasy) labels enhance
purchase intentions, but only when brand trust is well-established.
Practical implications - Wine companies could consider using fantasy themes on wine
labels but only when trust in their wines is well-established. Our results suggest that (1)
established brands (brand strength is a cue of brand trust) and (2) new brands that already
hold quality recognitions for their wines (e.g., medals, awards, expert ratings) could use
fantasy themes on wine labels to differentiate themselves in the marketplace.
Keywords: Wine labels, fantasy themes, trust, principle of hedonic dominance
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1. INTRODUCTION
To what extent can our visual imagination determine what we taste? In an informative
study, 54 wine experts tasted two glasses of identical white wine (one of which was redcolored with taste neutral food coloring). Surprisingly, none of the 54 experts were able to
recognise that the ‘red-colored wine’ was, in fact, white wine (Brochet, 2001). Hence,
people (even experts) struggle to differentiate accurately by taste; as other senses, in
particular vision, interfere with their perception. Managers are well aware of that and
invest heavily into product labels, providing visual and/or semantic information to
influence taste perception. For example, in the US market alone, companies spend more
than $120 billion annually for packaging and labelling (Kerin et al., 2009) with particular
emphasis on unique visual designs that engage consumers imagination (Hagtvedt and
Patrick, 2008).
Fantasy themes are a current, fast-growing trend that is spreading out among product
categories beyond movie business. For example, a selection of 12 Australian wines called
the Wines of Westeros (inspired by the fantasy series Games of Thrones) is forthcoming
(Common Ventures, 2015). This anecdotic evidence emphasises the current popularity of
using fantasy themes to market products. Although visual designs that stimulate
imagination (e.g., fantasy themes) seem to be an increasingly popular choice for marketing
managers (Nenkov and Scott, 2014), it is still unclear whether these designs enhance or
hurt consumers’ product perception and purchase responses.
The principle of hedonic dominance suggests that people tend to make more affective
evaluations than cognitive ones, once the functional requirements of consumers are met
(Chitturi et al., 2007, 2008). This suggests that unusual package designs (such as fantasy)
are only affectively processed and enjoyed when consumers first established trust in the
product/brand. In this study, we aim to assess the effect of fantasy wine labels on purchase
intentions. This current research makes two important contributions. First, to the best of
our knowledge, this is the first study to examine the effects of visual designs that use
fantasy themes. Therefore, this research contributes to the literature on visual designs that
stimulate elaboration (Labroo et al., 2008; Landwehr et al., 2013; Nenkov and Scott,
2014). Second, we apply the principle of hedonic dominance and shed light on when visual
designs stimulating elaboration such as fantasy wine labels are likely to have an effect on
purchase intentions. On this basis, we derive important implications for marketing and
brand managers involved in the wine industry.
2. THEORETICAL BACKGROUND
In this research, we define fantasy as a fiction genre that includes imaginative elements
such as magical or mystical creatures: e.g., dragons and unicorns (Campbell, 2015; St.
James et al., 2011). Because fantasy themes stimulate imagination (Belk and Costa, 1998;
Kozinets, 2001; Martin, 2004), they also facilitate information processing by increasing
the amount of visualisation and the generation of mental images (Zhao et al., 2009).
Moreover, the literature suggests that fantasy themes allow the creation of a more pleasant
world (Belk and Costa, 1998; Kozinets, 2001; Kozinets et al., 2004; Martin, 2004) because
the "fantastic imaginary" (Martin, 2004) enables people to construct their own thoughts of
a limitless world of possibilities (Kozinets, 2001; Schlosser, 2003; St. James et al., 2011),
either visually or semantically (Wyer et al., 2008).
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The principle of hedonic dominance suggests that people tend to make more affective
evaluations once functional requirements are met (Chitturi et al., 2007, 2008).
Specifically, consumers give greater weight to hedonic attributes when they take the
functional attributes for granted (Chitturi et al., 2007). People tend to avoid losses (e.g.,
poor product quality), and trust in products/brands minimises these losses (Landwehr et
al., 2012). Thus, an acceptable level of functionality is necessary to establish this trust
relationship. Several strategies can help to establish trust in the product: e.g., brand
strength and expertise cues (Dawar and Parker, 1994; Landwehr et al., 2012). We expect
that fantasy labels increase purchase intentions when trust is well-established.
Recent research suggests that unique and atypical product design lead to positive affective
responses when consumers engage in effortful cognitive processing (Bloch, 1995;
Landwehr et al., 2013). Visual designs that use fantasy themes enable people to enjoy
constructing imagery (Zhao et al., 2009). The creation of such an unreal world is a way of
escaping from reality (Belk and Costa, 1998; Hirschman, 1983; Kozinets et al. 2004) and
generating positive emotions from processing fantasy related-information (Holbrook and
Hirschman, 1982). That is because the imagery is a sensory process (MacInnis and Price,
1987) which triggers positive affective reactions (Petrova and Cialdini, 2005; Schlosser,
2003). As a result, such elaboration enables consumers to enjoy processing the products’
benefits (Nenkov and Scott, 2014). Thus, pleasing aesthetics increases affective reactions,
yet consumers are likely to also consider indicators of functionality (e.g., brand
information) that influence quality judgments of the product (Page and Herr, 2002).
Hence, once the cut-offs for utilitarian benefits are met, and people establish trust in the
product/brand, positive affective reactions are likely to be enhanced (Chitturi et al., 2007,
2008), resulting in the increased purchase intentions (Chaudhuri and Holbrook, 2001).
3. STUDY 1
Design. The experiment is a 2 (wine label design: fantasy vs. no-fantasy) x 3 (mode of
information: picture-brand name congruence vs. picture-brand name incongruence vs. text
only) between-subjects design. Two fictitious wine labels were designed. Fantasy was
manipulated by a picture of a fantasy animal (dragon or pegasus) and/or a fantasy animalevoked brand name (Dragon Estate) while no-fantasy labels had a real animal (falcon or
heron) and/or evoked brand name (Falcon Estate). To cover the whole spectrum of how
fantasy themes could realistically appear on the label, we also manipulated the mode of
information and used it as a control variable. That is because the picture-brand name
congruence (vs. incongruence) is easier to process by being meaningful (McCracken and
Macklin, 1998). However, some individuals find it easier to comprehend semantic
information than visual information (Wyer et al., 2008), that is why text only conditions
were also used in this study.
Sample and Procedure. 237 adults over 18 years old (69% female) were contacted on-line
via snowball sampling in New Zealand. Participants were randomly assigned to one of the
six conditions. After respondents saw the wine label, they indicated their trust in taste of
the assigned wine in an open-ended question “What would you expect this wine to taste
like?”
Purchase intentions were measured on a 7-point scale (1 = very unlikely to buy; 7 = very
likely to buy, adapted from Landwehr et al. 2012). Next, to be able to include trust in taste
as a moderator, we had to code the open-ended question “What would you expect this
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wine to taste like?” The open-ended question was coded by two independent judges to
reflect the participants' trust in taste. Participants' responses were coded into "0" when
they used negative words and into "1" when they used neutral or positive words to
describe their taste perception of the assigned wine label.
Fantasy manipulation check: Results confirmed that participants perceived the amount
of fantasy (measured by "How much fantasy does this label contain?”) to be higher in
the fantasy conditions (M
= 4.02, SD = 1.97) than in the no-fantasy conditions (M
= 2.88, SD = 1.78, t(235) = − 4.62, p < .001).
We estimated a 2 (wine label design: fantasy vs. no-fantasy) × 2 (trust in taste: low vs.
high) ANOVA with purchase intentions as the dependent variable and mode of
information as a covariate. The main effect of fantasy on purchase intentions is
insignificant (p > .10), while the effect of trust in taste is significant (p < .001). The main
effect of the mode of information was significant (F(2, 231) = 6.73, p < .002). As expected
(see Fig. 1), there was a significant interaction between fantasy and trust in taste on
purchase intentions (F(1, 231) = 8.85, p <
.01). To interpret this significant interaction effect, the follow-up results revealed that
within the group of high trust in taste, participants were less willing to buy a bottle of
wine with a no-fantasy label (M
= 3.00, SD = 1.57) than with a fantasy label (M
= 3.69, SD
= 1.67; t(147) = − 2.60, p = .01). In contrast, within the group of low trust in taste,
although the means suggest that participants were less willing to buy a bottle of wine
with a fantasy label (M
= 1.83, SD = 1.10) than with a no-fantasy label, the difference
is insignificant (M
= 2.23, SD = 1.23; t(86) = 1.58, p > .10).
Fig. 1: Purchase intentions of fantasy labels in the presence of trust in taste (Study 1;
standard deviation in brackets)
4
3.69
(1.67)
3,5
3.00
3
(1.57)
2.23
2,52
1.83 (1.23)
(1.10)
1,5
Fantasy
p=
.01
Non-fantasy
p>
.1
1
Low trust in taste
High trust in taste
Discussion. The findings of Study 1 suggest that people are less likely to buy a bottle of
wine with a no-fantasy label rather than with a fantasy label when their taste expectations
are met or exceeded. Thus, trust in taste seems to be an important determinant of purchase
intentions. In Study 2, we directly manipulated trust with using objective criteria (i.e.,
Parker rating points) to reflect the level of expertise of the wine producer and wine quality.
394 | P a g e
4. STUDY 2
Stimulus development. The experiment is a 2 (wine label design: fantasy vs. no-fantasy) x 3
(perceived expertise: low expert rating vs. high expert rating vs. control: no expert rating)
between-subjects design. Two fictitious wine labels were designed. Fantasy was
manipulated by showing a picture of a fantasy animal (unicorn) and a fantasy-evoked brand
name (Mystery Estate) while no-fantasy labels had a real animal (horse) and a no-fantasy
evoked brand name (Mastery Estate). Perceived expertise was manipulated by using a 100point scale from the wine specialist magazine Wine Advocate (established by the
worldwide wine expert Robert Parker and commonly used in US wine market) and
showing either no rating as no indication of perceived expertise or 71 points as low
expertise or 94 points as high expertise. Below the wine rating indications, the Wine
Advocate Rating System was provided (including the range of relevant values). This rating
point scale, as an indicator of wine quality, is one of the practical examples of how wine
companies that use fantasy labels could establish consumers' trust in their wines.
Sample and procedure. A sample of 241 adults (39% female) from across the United
States was recruited through Mechanical Turk to participate in this online experiment in
exchange for 40 cents. Participants were randomly assigned to one of the six conditions.
Purchase intentions were measured in the same way as in Study 1.
Fantasy Manipulation Checks were conducted following the same procedure as in study 1.
As intended, participants perceived the amount of fantasy to be higher in the fantasy
conditions (M
= 5.51, SD =1.39) than in the no-fantasy conditions (M
= 3.92, SD =
1.81, t(228.52) = −7.66, p < .001 ). Perceived Expertise Manipulation Checks. Participants
answered a 2-item index of competence (α = .94) “To what extent do you believe this wine
producer is”, using two items “credible” and “competent” (1 = not at all; 7 = very much,
adapted from Aaker et al., 2010). As intended, results revealed that participants perceived
the level of the wine producer's expertise to be higher in the high expert rating conditions
(M
= 5.47, SD = .94) than in the low expert rating conditions (M = 4.65, SD = 1.07, t(157)
=−
5.09, p < .001).
We estimated a 2 (wine label design: fantasy vs. no-fantasy) × 3 (perceived expertise: no
vs. low vs. high expert ratings) ANOVA with purchase intentions as the dependent
variable.
Results revealed a marginally significant effect of fantasy labels (F(1, 235) = 2.81, p <
.10) and a significant effect of perceived expertise (F (2, 235) = 7.60, p = .001). The
interaction between fantasy and perceived expertise was not significant (p = .12).
However, planned contrasts (see Fig. 2) showed that participants were more willing to buy
a bottle of wine with a fantasy label (Mystery Estate) than with a no-fantasy label
(Mastery Estate), but only in the high expertise conditions (M
= 5.05, SD
= 1.15 vs. M
= 4.16, SD = 1.50; F(1, 235) = 6.75, p = .01). Within the no
and low expertise conditions, the difference between fantasy and no fantasy labels was not
significant (Ps > .10)
395 | P a g e
Fig. 2: Purchase intentions of fantasy labels in the presence of perceived expertise (Study
2; standard deviation in brackets)
6
5.05
5
4
3.88 3.85
3.67 3.79
(1.53) (1.71)
(1.62) (1.52)
4.16
(1.15)
(1.50)
no fantasy
3
fantasy
2
p>
.1
p>
.1
no expertise
low expertise
p=
.01
1
high expertise
information
Discussion. The results of Study 2 are consistent with findings of Study 1 and further
reveal that even a subtle manipulation of the brand name (Mystery vs. Mastery) and using
a unicorn versus horse can significantly increase purchase intentions for the wine labels,
but only if consumers trust the producer’s expertise. For wine companies that consider
using fantasy labels, this study suggests that high rating points on the Parker scale are one
of the ways of establishing trust in wines (by reflecting a high producer's expertise and
wine quality) and increasing consumers' purchase intentions.
5. GENERAL DISCUSSION, LIMITATIONS AND FURTHER RESEARCH
Across two studies using different country samples and different ways of manipulating
fantasy labels, we find a consistent pattern in the results. Namely, fantasy labels increase
purchase intentions, but only when trust in the product is established. The findings
demonstrate that unusual designs such as fantasy labels should be used with care and only
when trust is well-established. Our findings have clear managerial implications for brand
managers and practitioners dealing with wine labels. Strong brands could consider
unusual wine labels because brand strength is a cue of brand trust (Dawar and Parker,
1994). Wine marketers should also ensure that consumers trust their existing products.
For example, wine companies could use fantasy labels to differentiate themselves in the
marketplace, but only when these companies already hold quality recognitions for their
products such as medals, awards, and stickers with high expert ratings (e.g., from Robert
Parker or James Halliday).
In line with previous studies (Chitturi et al., 2007; Melnyk et al., 2012), we focused on
purchase intentions. That is because consumers' intentions are important to predict the
direction of future purchases. In general, purchase intentions are positively linked to
purchasing behaviour (Ajzen and Fishbein, 1980). However, they cannot always convert
into purchasing behaviour (Chandon et al., 2005; Morwitz et al., 1993). Thus, further
396 | P a g e
research should address this point by investigating purchasing behaviour. For example,
further research should look at actual sales of existing wine brands using fantasy labels in
order to find how fantasy labels drive sales in the marketplace. This current research
investigated how consumers react to fantasy wine labels in artificial settings. Other
research should further explore how fantasy labels affect consumers’ responses by
conducting field studies (e.g., in a liquor store, supermarket or winery). Furthermore, this
paper focused on the effect of fantasy wine labels on consumers using samples from “New
World wine countries”. This effect may differently affect consumers from “Old World
wine countries” because they are perceived to be more traditional and attached to heritage/
“terroir” values. For example, would including an ‘unreal’ animal on a French heritagebased label increase purchase responses for a bottle of wine? Finally, we used only one
country of origin: Australia, future research should employ other countries of origin (e.g.,
“Old world wine countries”). That is because countries and regions of origin play an
important role, as indicators of wine quality and reputation, in the consumer preference and
consideration to purchase a bottle of wine (Ling and Lockshin, 2003; Orth et al., 2005).
Therefore, these geographical cues may also affect consumers' reactions to wine fantasy
labels.
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Demographics of U.S. Wine Consumers:
A Comparison between Two Data Collection Approaches
Michaela A. Nuebling
Purdue University, USA
[email protected]
Rhonda K. Hammond
University of Arkansas, USA
[email protected]
Carl A. Behnke
Purdue University, USA
[email protected]
Abstract:
Purpose - Today, researchers can choose between various data collection methods. Recently,
the use of Amazon Mechanical Turk (MTurk) has become a popular approach to subject
recruitment. However, its soundness is often questioned. The goal of this paper is to
compare and contrast subjects’ demographic data collected with self-administered online
surveys.
Design/methodology/approach - An identical survey, administered by Qualtrics, was
distributed two ways. For study 1 (“Traditional”), subjects were provided with the survey
link by restaurant staff, via one winery’s Facebook page and another winery’s newsletter,
and via email by wine educators at three U.S. based universities. For study 2 (“MTurk”),
data were collected using the Amazon Mechanical Turk platform. Data were analysed
with SPSS version 22; the data set was split and independent sample t-tests were utilized
to compare groups. The data collection was funded by the Nanshan America Group.
Findings - Diverse findings emerged from the comparison. Similarities between subjects of
the two studies were found in regard to age, wine consumption experience, and ethnicity.
Significant differences emerged for participants’ levels of wine involvement, subjective
knowledge, wine consumption while dining out, and willingness to pay for a glass of wine in
a foodservice setting. However, in comparison to a 2014 study profiling the U.S. wine
consumer, parallels with the MTurk participants emerged.
Practical implications - In line with other social sciences research, these findings suggest
that MTurk is a viable option for wine consumption related data collection, in the United
States.
Keywords: Demographics, Amazon Mechanical Turk, Research Methodology, Wine
Consumer Research
400 | P a g e
1. INTRODUCTION
Since the emergence of the internet, more sources for data collection have become available
to researchers in all disciplines (Dillman, Smyth, and Christian, 2009). Particularly, those
interested in human behaviour (social sciences) have a variety of options to gather data,
including wine consumption studies. For example, questionnaires or surveys are frequently
utilized which often refer to tests and assessments administered to participants who selfreport their opinions and behaviours on a voluntary basis (Gosling, Vazire, Srivastava, and
John, 2004). In the past, such survey research required a significant timeline (e.g. distribution
via postal mail) and cost commitment (e.g. for paper, postage, return-envelopes) (Dillman et
al., 2009). Today, questionnaires can be more easily administered online. However, data
quality of internet-based methodology has been questioned, particularly when using Amazon
Mechanical Turk (MTurk) to recruit participants (Paolacci, Chandler, & Ipeirotis, 2010).
Amazon MTurk is a tool to collect data in a timely manner at relatively low cost. It has
recently been used in various disciplines, including wine business research (Robson,
Plangger, Campbell, and Pitt, 2014). MTurk is a platform of paid “workers” who complete
various online tasks such as surveys and experiments that can be administered with tools like
SurveyMonkey, Qualtrics or MTurk software. The person facilitating a task (requester),
determines a compensation amount prior to study administration and the person completing a
task (worker) gets paid automatically or manually (Buhrmester, Kwang, and Gosling, 2011).
According to Paolacci, Chandler, and Ipeirotis (2010), compensation in the U.S. varies and
can be as little as $0.01 but rarely exceeds $1 per task.
Data from such internet-based samples have raised questions of accuracy and generalizability
pertaining to participants’ demographic representation, leading to a number of research
studies (Casler, Bickel, and Hackett, 2013; Buhrmester, Kwang, and Gosling, 2011; Paolacci
et al., 2010; Krantz and Dalal, 2000). Furthermore, the motivation level of participants has
been questioned (Buchanan, 2000) to the point that some research proposed that samples
were unreliable and not representative of study populations when compared with traditional
methods (Krantz and Dalal, 2000). On the contrary, social psychology research investigating
these issues proposed that differences between traditional and internet-based samples,
including those recruiting participants via MTurk, are less dramatic than initially anticipated
(Casler et al., 2013; Buhrmester et al., 2011; Paolacci et al., 2010; Gosling et al., 2004). A
controversy emerges that warrants clarification as researchers of all disciplines agree that the
benefits of faster and more economical data collection are appreciated as long as data quality
is not jeopardized. Put into the context of wine business research, the question emerges to
what degree social scientists’ claims of this nature apply to wine business research and
particularly to the demographic profile of the U.S. wine consumer. A comparison between
wine consumer data collected via MTurk and subjects recruited via email/Facebook/in-person
was completed to explore demographic differences between the two samples.
401 | P a g e
2. METHODOLOGY
The same Qualtrics based online survey was distributed to participants in two ways: (1) via
email, social media posting (e.g. Facebook), in person and (2) via Amazon Mechanical Turk
(MTurk). Participants of study 1 were able to voluntarily join a drawing for one of five 2015
Food & Wine guides (~$10), whereas MTurk workers were compensated with $0.70 for each
fully completed questionnaire. Funding for the study incentives (study 1) and study
compensation (study 2) was provided by the Nanshan America Group.
The following measurement scales were utilized:






wine consumption experience (in years);
wine consumption frequency in foodservice establishments, 2-item-scale, 6-point
Likert, adopted from Hammond, Velikova, and Dodd (2013);
involvement, 3-item-scale, 7-point Likert, modified based on Lockshin, Spawton, and
Macintosh (1997), Cronbach α .80 (study 1), Cronbach α .79 (study 2);
subjective knowledge, 3-item-scale, 7-point-Likert, modified based on Brucks
(1985), Cronbach α .77 (study 1), Cronbach α. 75 (study 2);
use of information sources, 10-item-scale, 5-point-Likert, modified and extended
based on Hammond et al. (2013), Cronbach α .83 (study 1), Cronbach α. 89 (study 2);
willingness to pay (in U.S. dollars) for a glass of wine in a foodservice establishment.
Prior to data analysis, total scores were calculated (if applicable), the normality of the data
distribution was assessed, and reliability analyses were conducted. Following Pallant’s (2013)
assessment strategy and recommendations, the data were considered reasonably normal and
reliable with Cronbach’s alpha above .70. Data from the two studies were compared in regard
to variables specific to wine consumption such as wine involvement, subjective knowledge,
and consumption experience. Additionally, socio-demographic information like income,
gender, and education was examined.
3. FINDINGS
The comparison of the two studies (see Table 1) showed diverse findings. For study 1,
participants were recruited from 22 states with the majority residing in CA, IN, and TX. The
participants of study 2 indicated residency in 35 states, predominately living in CA, FL, GA,
and PA. In regard to participants’ use of wine related information sources, data suggested
that interpersonal exchange with others, such as family, friends, and restaurant service staff,
is more widely and frequently used than mass media information sources like books, blogs,
and magazines. Similar usage frequency was found for both studies.
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Table 1. Comparison between two data collection approaches.
Variable
Consumption
Experience (in years)
Study1a
“Traditional”
µ=14.19 (14 years)
Study2b
“MTurk”
µ=12.43 (12 years)
Sig. (2-tailed)
.24
n=144
Consumption
Frequency
(1) Excluding fast food how
often do you dine out?
(2) How often do you order
wine when dining out?
µ=3.50; n=147
µ=3.19
.03*
µ=2.61; n=147
µ=3.47
.000***
Involvement
µ=18.37; n=146
µ=15.02
.000***
µ=15.03; n=146
µ=12.23
.000***
(1)I enjoy drinking wine
with my meals.
(2)It does not have to be a
special occasion to enjoy
wine with dinner.
(3)I have a strong interest
in wine.
Subjective Knowledge
(1)Relative to people you
know (e.g. friends), how
would you rate your
knowledge of wine?
(2)Based on your current
knowledge of wine, how
comfortable would you be
ordering wine in a
restaurant.
(3)Relative to a wine expert
(e.g. certified sommelier),
how would you rate your
knowledge of wine?
Education
High
school/diploma/GED
Some college work
Bachelor’s degree
Master’s degree
Doctoral degree
Professional degree
Ethnicity
White/Caucasian
African American
Hispanic
Asian
Native American
Pacific Islander
n=138
4
27
72
21
7
7
n=138
122
3
2
8
1
10
29
55
13
3
3
94
6
4
6
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Other
Income
$19,999 or less
$20,000-$39,999
$40,000-$49,999
$50,000-$59,999
$60,000-$69,999
$70,000-$79,999
$80,000-$89,999
$90,000-$99,999
$100,000-$119,999
$120,000-$139,999
$140,000-$159,999
$160,000 or more
Gender
Female
Male
Age (in years)
Willingness to Pay
(in USD)
Glass (5oz.) of red wine
Glass (5oz.) of white
wine
n=138
12
8
2
4
8
13
9
6
8
11
6
27
n=142
100
42
µ=38.56 (38 years);
n=136
21 (min.) – 75 (max.)
3
n=110
10
31
12
18
13
3
5
5
7
1
2
3
48
65
µ=35.89 (36 years)
22 (min.) – 65 (max.)
.12
µ=11.40 (USD); n=141
µ=8.61 (USD)
.000***
µ=10.26 (USD); n=134
µ=8.61 (USD)
.01**
Note. * Significant at .05 level. ** Significant at .01 level. *** Significant at .001 level. a due
to missing responses sample size is indicated for each variable, b unless noted otherwise
n=113.
The data comparison showed that participants of both studies have been consuming wine for
similar durations of time, which appears reasonable considering that participants indicated
comparable average ages. As far as dining out and consuming wine when dining out is
concerned, MTurk workers who are visiting foodservice establishments report drinking wine
significantly more often even though they dine out slightly less often than consumers who
participated in study 1. Significant differences between participants emerged in regard to
consumers’ involvement with wine and their subjective wine knowledge. MTurk workers
considered themselves significantly less involved and knowledgeable than study 1participants. Examining education and ethnicity, the samples did not differ much; participants
of both studies were predominately Caucasian and had completed at least some college work
while a Bachelor’s degree was the most frequent reported educational degree in both samples.
Despite the similarities in educational background the majority of MTurk workers (n=84)
indicated earnings below $70,000; whereas, over half of study 1-participants reported annual
household incomes of above $70,000. According to Paolacci et al. (2010) this is not unusual;
MTurk workers are known for lower income along with higher than average (U.S.) education
levels. In regard to gender, the vast majority of study 1 participants were female whereas the
404 | P a g e
MTurk sample was more equally made up of males and females. Interesting findings
emerged from the comparison of participants’ willingness to pay for a glass of wine in a
foodservice setting. MTurk participants were inclined to spend about $9 per glass for either
white or red wine. On the other hand, subjects who participated in study 1, were not only
prepared to spend significantly more per glass of wine but also showed different willingness
to pay for red and white wine.
This comparison highlights interesting similarities and differences between these two studies.
Based on research conducted by Thach, Olsen, and Atkin (2014) with the aim to profile the
American wine consumer, the findings can be compared further. Data from the 2014 study
indicated that U.S. wine consumers are predominately Caucasian, residing in states such as
CA, FL, NY, IL, and TX, and earning above $50,000, while holding a college degree (Thach,
Olsen, and Atkin, 2014). Additionally, U.S. wine consumers can be found in any generation
between 21 and 68+ years of age. As far as wine purchases in foodservice establishments are
concerned, Thach et al. (2014) suggested that the majority of consumers were willing to
spend between $5 and $10 per glass of wine. The study (Thach et al., 2014) did not include
information pertaining to wine involvement and levels of subjective knowledge, however,
similarities between this U.S. wine consumer profile and MTurk study participants are
intriguing, particularly in terms of ethnicity, residency, income, education, age, and
willingness to pay for wine by the glass.
4. DISCUSSION
Similar to other survey research with human subjects, the two studies were limited in regard
to self-reported data and unequal representation of gender (study 1) and participants from all
U.S. states. Additionally, for study 1 various recruitment opportunities (email, in person,
Facebook) were used which may limit the generalizability of the findings. Furthermore a
connection between recruitment method and responses cannot be drawn; hence, a distinction
between the three recruitment sources is not possible. Considering the time it took
participants to complete the survey it should be noted here that MTurk workers spent roughly
half the time (on average) to respond in comparison with “traditional” participants.
Acknowledging that people who partake in the MTurk platform are more experienced in
completing online tasks such as surveys, it might be warranted for future research to further
explore the time spent per task in relation to data quality. No attention checks were used in
either one of these studies.
The comparison of the two studies for which surveys were distributed (1) via email/social
media/in-person and (2) via Amazon Mechanical Turk showed some significant differences
(see Table 1). However, similarities emerged when taking into consideration recent findings
of a large study (n=1028) profiling the American wine consumer (Thach et al., 2014) which
was in turn proposed to have vast similarities to other studies of the American wine
consumer. Especially, socio-demographically the differences between study 2 and the 2014
wine consumer profile were rather small. This falls in line with Paolacci et al. (2010) who
compared demographics of MTurk workers with a student sample and a sample of online
discussion board participants, finding little demographic differences. Furthermore, this is in
405 | P a g e
agreement with findings of Buhrmester et al. (2011). It can therefore be suggested that wine
consumer data collected via MTurk is only marginally different than the average American
wine consumer in regard to gender, income, education, and ethnicity.
An additional aspect from this study comparison emerged due to the distribution method for
online-based surveys. With the aim to capture a cross-section of U.S. wine consumers,
various methods were utilized to distribute the survey link for study 1 (e.g. winery newsletter
recipients, winery Facebook followers, wine education students, restaurant visitors).
Heightened levels of wine involvement and subjective knowledge are therefore not
surprising; however, they might not be fully representative of the average American wine
consumer. The average U.S. wine consumer might be closely represented by the MTurk
sample; however, if due to study purpose a narrower subset of wine consumers is required
(e.g. highly involved consumers or people interested in wine tourism or fine dining), MTurk
may not be recommendable as a recruitment tool. In other words, MTurk might be a suitable
and convenient instrument to aid the collection of data for broad wine consumption study
contexts. Due to the exploratory nature of this study, further comparative research exploring
MTurk versus other recruitment methods should be conducted.
5. REFERENCES
Buchanan, T. (2000), “Potential of the internet for personality research”, in Birnbaum, M. H.
(Ed.), Psychological Experiments on the Internet, Academic Press, San Diego, CA, pp. 121140.
Buhrmester, M., Kwang, T. and Gosling, S. D. (2011), “Amazon's Mechanical Turk: a new
source of inexpensive, yet high-quality, data?”, Perspectives on Psychological Science, Vol. 6
No. 3, pp. 3-5.
Brucks, M. (1985), “The effects of product class knowledge on information search
behaviour”, Journal of Consumer Research, Vol. 12 No. 1, pp. 1-16.
Casler, K., Bickel, L. and Hackett, E. (2013), “Separate but equal? A comparison of
participants and data gathered via Amazon’s MTurk, social media, and face-to-face
behavioral testing”, Computers in Human Behavior, Vol. 29, pp. 2156–2160.
Dillman, D. A., Smyth, J. D., and Christian, L. M. (2009), Internet, Mail, and Mixed-Mode
Surveys: The Tailored Design Method, John Wiley & Sons, New York, NY.
Gosling, S.D., Vazire, S., Srivastava, S., and John, O.P. (2004), “Should we trust web-based
studies? A comparative analysis of six preconceptions about internet questionnaires”,
American Psychologist, Vol. 59, pp. 93–104.
Hammond, R, Velikova, N., and Dodd, T. H. (2013), “Information sources used by
Millennial restaurant wine consumers”, Journal of Foodservice Business Research, Vol. 16
No. 5, pp. 468-485.
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Krantz, J. H., and Dalal, R. (2000), “Validity of web-based psychological research”, in
Birnbaum M. H. (Ed.), Psychological Experiments on the Internet, Academic Press, San
Diego, CA, pp. 35-60.
Lockshin, L. S., Spawton, A. L., and Macintosh, G. (1997), “Using product, brand and
purchasing involvement for retail segmentation”, Journal of Retailing and Consumer Science,
Vol. 4 No. 3, pp. 171-183.
Pallant, J. (2013), SPSS Survival Manual, McGraw Hill, New York, NY.
Robson, K., Plangger, K., Campbell, C., and Pitt, L. (2014), “Objective and subjective wine
knowledge: evidence from an online study”, paper presented at the 8th AWBR Conference,
June 28 – June 30, Geisenheim, Germany, available at
http://academyofwinebusiness.com/wp-content/uploads/2014/07/CB02_Robson_Karen2.pdf
(accessed 5/1/2015).
Thach, L., Olsen, J., and Atkin, T. (2014), “Snapshot of the American wine consumer”,
available on http://www.winebusiness.com/news/?go=getArticle&dataid=142634 (accessed
5/8/2015).
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Developing Resource Integration Capabilities in
Wine Industry R&D Collaborations
Jodie Conduit
[email protected]
Carolin Plewa
[email protected]
Roderick J. Brodie
University of Auckland, New Zealand
[email protected]
Abstract:
Purpose: This project aims to identify the resource integration capabilities needed by all
parties involved in R&D focused collaborations between the wine industry and its research
partners and determine how such capabilities can be mutually developed.
Design/methodology/approach: 20 in-depth interviews were conducted with a series of
experts from universities, government research institutions, and industry partners from the
wine industry in South Australia regarding wine-related R&D collaborations. The interviews
were analysed by thematic coding of the transcripts.
Findings: The results reveal a range of capabilities critical for the successful resource
integration in R&D collaborations, which can be grouped into technical capabilities
(technological competence and market knowledge competence), as well as relational
capabilities, related here to capabilities enabling the resource integration between partners
(absorptive capacity, network competence and co-creation capability). We also identify
evidence of the co-development of these capabilities over time among collaboration groups.
Practical implications: Identified capabilities should be developed in a broad range of wine
industry participants to facilitate more far-reaching collaboration and resource integration in
R&D across the wine sector. Findings from this research will provide a framework to enable
these skills to be developed among further participants in the wine sector.
Keywords: Co-creation, resource integration, capabilities, R&D collaborations, competencies
408 | P a g e
1. BACKGROUND
The global wine industry has undergone a period of dramatic modernisation and
transformation, founded in changes of market and production characteristics as well as
technological advance (Giuliani et al., 2010). To develop their competitive advantage in the
global wine industry, new wine producing regions in particular have responded, investing
heavily in research and development (R&D) activities. Indeed, the search for innovation and
competitive advantage has led to an increasing frequency and intensity of interactions
between researchers and members of the wine industry (Cusmano et al., 2010). Universityindustry collaborations are now recognised as important mechanisms for providing R&D
services known to stimulate the economic cycle of innovation and growth (BerbegalMirabent et al., 2015), with scientists being acknowledged as playing a key role in the
advancement of the industry (Guliani et al., 2010). University-industry collaborations offer a
unique opportunity to integrate the diverse resources that exist within the respective partners.
Strategy research has acknowledged for some time that inter-organisational collaborations
involve the sharing of resources for improved outcomes (Hardy, Phillips and Lawrence,
2003). Indeed, the primary driver of such collaborations is the reliance each partner has on
the resources of others to achieve the desired outcome (Berbegal-Mirabent et al., 2015). For
example, while the involvement of regional wine producers enables research institutions the
physical resources (e.g. the grapes) and practical insight to facilitate research that will benefit
the industry, researchers offer the scientific expertise and tools facilitating innovation.
While previous strategy literature has recognised that resources are shared in collaborations;
recent literature has highlighted the importance of the integration of partner resources so
value is co-created (Vargo and Lush, 2015). We draw from the comprehensive reviews of the
literature on resources by Madhavaram and Hunt (2008) and Kozlenkova et al. (2014), to
further develop our knowledge in this area. We also draw on the theoretical foundations of
resource-based theory (Barney, 2014) and dynamic capabilities theory (Teece et al., 1997).
Resource-based theory recognises that both operand resources (those on which an act or
operation is performed e.g. grapes) and operant resources (those that act on other resources
e.g. scientific knowledge) provide an avenue for competitive advantage (Vargo and Lusch,
2015). Recent commentaries point out that a strategic advantage requires resources that are
‘socially complex’ and thus are difficult to imitate by others (Barney, 2014). This points to
the operant resources of a firm, which can be conceptualised as competences, capabilities and
dynamic capabilities (Madhavaram and Hunt, 2008).
In this exploratory study, we focus primarily on capabilities and thus a “subset of resources”
(Kozlenkova et al., 2014, p. 4) representing the “organizationally embedded non-transferable
firm-specific resource whose purpose is to improve the productivity of the other resources
possessed by the firm” (Makadok, 2001, p. 398). In particular, this research seeks to identify
key capabilities (resources) that (1) are integrated within R&D collaborations in the wine
industry and (2) enable resource integration in this context. Despite the increasing conceptual
and empirical evidence as to the relevance of resource integration for the creation of value
(Gummesson and Mele, 2010), surprisingly little is known about the specific capabilities
partners bring to the collaboration. This leads us to our first research question.
409 | P a g e
Research Question 1: What are the key capabilities that (a) are integrated between
partners, and (b) facilitate resource integration in wine-industry R&D collaborations?
In wine industry R&D collaborations, various partners integrate these capabilities (or operant
resources) to gain value from the collaboration (Madhavaram and Hunt, 2008). By coming
together, the partners develop and grown their own as well as each others’ capabilities. This
reflects the notion of dynamic capabilities espoused by Teece et al., (1997, p. 516) as "the
firm’s ability to integrate, build, and reconfigure internal and external competences to address
rapidly changing environments". As R

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